MeulenBth section one corrected 06 06 03
208 pages
INSTEAD OF A MAGAZINE
Correspondence, what is left of it and has been found, between
ULRICH von BECKERATH, 1882-1969 &
HENRY MEULEN, 1882-1978,
It deals mainly with monetary freedom and ideas on free banking, but also with free trade, a free economy, criticism of overpopulation notions, anarchism, war and peace, revolution, liberation, totalitarianism, right and left type, racism, nationalism, tyrannicide, individual vs. collective responsibility, cooperative production, rights and liberties, philosophy, Kantian ethics, egoism, utilitarianism, atheism, Christianity, Buddhism, international languages etc.
Both were fans of Benjamin R. Tucker.
It spanned from about 1932 to 1959 (1969?) but only one 1935 letter is represented here. The rest is from 1946 to 1959.
Compiled, edited and commented upon by John Zube, jzube@acenet.com.au (02) 48 771 436,
35 Oxley St. or P.O. Box 52, Berrima, NSW 2577, Australia.
U. v. Beckerath was a man who came once very close to shooting Hitler. But then most of these and numerous other important letters and papers of his would never have been written. He was also associated with the resistance which culminated in the well-known tyrannicide attempt against Hitler on July 20th, 1944. He survived the subsequent and often atrocious mass murder, by the Nazi regime, of about 5,000 people, who were somehow associated with that resistance attempt, only because a friend of his close friend Heinrich Rittershausen managed to get access to their files at the Nazi's "Peoples' Court" and to destroy them. (See page 59. His letter of 4. II. 1949.)
At one stage, as one of the main contributors to the "Four Law Drafts", he might have come to help prevent the rise of the Nazi regime and WW II: Dr. Munzer, also a contributor, was a close advisor to Dr. Bruening then Chancellor and these drafts were waiting for Dr. Bruening's signature as emergency legislation to overcome the Great Depression - and as such they would have worked! - when the Bruening government was overthrown through the influence of some, who feared that Bruening, in desperation, might realize some popular "land reform" plan which would have expropriated some large proprietors of land.
His main and life-long labour was the development of sound monetary freedom ideas and techniques.
This correspondence is something of a treasure chest of ideas and references of interest to many freedom and peace lovers, from two thoughtful lives.
Both were fans of Benjamin R. Tucker. Meulen knew him personally.
The friendship between B. & M. persisted in spite of their strong disagreements on many subjects.
While B. had also many strong opinions and engaged in "prophecies" or forecasts which did not always come true and made at least two proposals which would have been better left unrealized (does anybody score perfectly?), Meulen was much more opinionated and prejudiced, especially when it came to the technical details of free banking, free trade and a free society. Beckerath, on the other hand, had frequently checked his own opinion again the facts, the own experiences and those of others, historical precedents, old and new literature references and looked at his ideas from almost all possible angles, or so it seemed to me. When he had to make guesses, they were at least well educated ones. Generally speaking, he stood up more consistently for individual freedom than did Meulen. In a few cases I rather side with Meulen but mostly I am on Beckerath's side.
The subjects are here dealt with mostly only in short segments, which gives the exchange almost the appearance of a periodial. One might call it a writen dialogue, but since so many references of others are included, it is more a "multi-logue", a survey of many different opinions. Because of this and because both appreciated Tucker's main book: "Instead of a Book" and his magazine "Liberty" this title was chosen here for this correspondence. (The same title has also been used and may still be used by a US anarchist magazine.)
U. v. Beckerath is insufficiently known as the author of 3 books on monetary freedom (soon to be placed on a website) and of numerous papers and letters on this subject. H. Meulen was somewhat better known, a,) as the author of "Free Banking, an outline of a policy of individualism", 1934, which is the second edition of his 1917 book: "Industrial Justice through Banking Reform" b.) as editor of "The Individualist".
The second edition of Meulen's book, 429 pages, was microfiched by me with some index notes by me and also a warning about this book by Ulrich von Beckerath, 7, April 1968, in PEACE PLANS 796.
All issues of Meulen's little Journal, "The Individualist", that I could get hold of and also my correspondence with him and some other material by and on Meulen were also microfiched by me in my PEACE PLANS series.
I have also microfiche-published thousands of pages of Beckerath's writings and many more of them are to come. Alas, most are only in German, with only few of them having been translated into English so far. But at least his three monetary freedom books were translated into English, however imperfectly. (Their French translation is much better.) In my edition of them in PEACE PLANS 9-11, I tried to eliminate most of these mistakes, as far as I could and also provided a common index to these three books. These 3 books are now available from me by e-mail, until they will appear on a website or on a CD-ROM.
The other writings by Beckerath, in my series, has not yet been indexed by me.
But an indication of his kind of monetary freedom thinking can be found in the preliminary but already long compilation of monetary freedom thoughts which is accessible on www.butterbach.net/freebank.htm A short representation of his monetary freedom ideas, largely in my own words, can also be found in my first peace book, now accessible on www.panarchism.info/
Numerous other monetary freedom titles were microfiched in my PEACE PLANS series and as many of them as possible could and should also be offered on CD-ROM and online.
I produced in 1990 a long monetary freedom bibliography, of about 124 pages, but have not yet got around to update it. It is also available from me by e-mail until it appears on a website or CD-ROM.
My main literature list and two supplementary lists are on www.butterbach.net/project.htm
The main literature list is also on my website www.acenet.com.au/~jzube together with some supplementary material.
All too little of the exchanges between B. & M. has found is way into M.'s small journal: "The Individualist", although M. believed that everything essential in his correspondence and reading had been abstracted or reviewed in it. Especially I missed, in those issues of THE INDIVIDUALIST that were accessible to me, B.'s criticism of M.'s free banking ideas. Maybe some of this is to be found in issues I have not yet seen. However, with only about 60 small pages published annually, M. could not include many contributions and filled his pages mostly without B.'s input.
B. alas, had never for long access to any periodical (the Annals, for his 3 books, excepted) and never got around to establishing one himself, although he had wished to do so from the time shortly before the Nazi regime began, in 1933. The Nazi period and the post-war years did not enable him to carry out this project. He remained largely confined to correspondence, of which probably more about 10 - 15 thousand pages remain to be digitized and microfilmed. Most of his correspondence up to 22 November 1943 was destroyed in an air raid on Berlin, with his extensive library.
The correspondence between B. & M. was, naturally, interrupted from at least 1939 to 1945.
B.'s letters sometimes amount almost to short "lectures", the only lectures he could provide as a rule, by writing letters, including his book reviews and comments on articles and clippings, with sometimes so many inserts included, that his envelopes burst.
He was usually very polite and even complimentary to the persons involved - but sharp, like Tucker, in attacks against ideas and opinions that he thought to be flawed. Usually they were. It is a pity that he had never a magazine like Tucker's and a readership like that of Tucker's "Liberty" at his disposal.
I knew B personally from 1952 to my emigration in 1959. Afterwards there was some correspondence between us, previously microfilmed by me. I may be biased in his favour, but I believe there are less flaws in his own ideas and those he preserved and transmitted, than in the ideas of most other writers of the past and present, who covered such a wide field. Most of the good ideas I know of I learned through him. Once I counted more than 200 of them.
The ideas and thinking of Meulen was, I believe, still rather flawed. But, judge for yourself the exchanges between these two long-term libertarian friends and fans of Tucker and of many of the other individualist anarchist classical writers.
B. always drew a strong distinction between letter writing and article writing and did not want segments of his letters to be published as articles but to remain characterised as mere letters. With articles he took even more care than with his very thoughtful and stimulating letters. In letters he sometimes resorted to all too general and collectivist terms like "Russia", when really meaning the Soviet regime. Here one should consider that most of these letters were written when he was old, under-nourished, sick, weak, tired or all too cold, in unheated or insufficiently heated room. Often B. could not write at all, when he was wide-awake at night, but had to stay in bed, sleepless, in an unheated room, the typewriter being too noisy for his neighbours at that time.
Taperecorders were only just becoming available in households. I once let him experiment with one heavy and large "Grundig" one that I had bought. He was not satisfied with the transcription of the record and did not continue experimenting with it. If small handy dictatating cassette recorders had been available to him -- or better, very quiet computer keyboards and computers - e-mail, websites, CD-ROMs, he would have been in his element, provided heat, food, health, old age and sleep would no longer have been problems for him.
Meulen could mostly write in relative comfort and with all his reference on hand and also many reference libraries not far away. For me he is a good example of the power which false and popular ideas and unchecked premises still have even over many libertarian minds and supposedly consistent adherents of free trade, free markets, free banking and free competition for institutions, which turn them into enemies rather than supporters of the best libertarian ideas and proposals.
That an old individualist anarchist like Meulen, a student of economics, persistent reader, publisher and editor of an individualist journal, could misunderstand free banking, gold standard and monetary freedom options, population questions as well as aspects of free trade, individual secessionism and exterritorially autonomous volunteer communitities, even rights and duties, as much as he did, as a long-term member of the Personal Rights Association, even after many years of correspondence with a man like Beckerath, shows well what an uphill battle lies still ahead for us, unless we do sufficiently mobilise all our resources, including especially the affordable, powerful and lasting alternative media and also realise the experimental freedom options in all spheres.
If I had done nothing else in my life than bring this correspondence within reach of everybody interested in it, then I could already consider my life as having been well spent.
Naturally, I could not sufficiently restrain myself from adding some comments. These are in brackets and marked with J.Z. and often the date. Those not interested in my opinion can thus easily go on ignoring them.
I believe that B.'s writings deal with many fundamental ideas, facts, proposals and possibilites that are all too much neglected by most other writers. Alas, he did not live to experience most of the large revival of libertarian thinking and writing, nor the rediscovery of monetary freedom ideas among academics and laymen since about 1974. But even in these new circles B.'s own writings on the subject, which I am inclined to call "classical" ones, remain largely unknown.
I have not yet got around to provide an index to this letter exchange. But it being digitized, such an index is less necessary that for ordinary print. One can always use the "find" command for certain terms that one is interested in. So, I may only get around to compile a list of words that I would recommend looking up in this exchange. But then I have already provided an index to many of the issues of Meulen's "The Individualist" and to the 3 monetary freedom books by Beckerath and these, as well as my first long and alphabetized compilation of monetary freedom ideas, definitions and opinions, can already serve as search aids for information in this letter exchange.
The single 1935 letter by B. and its following summary can well serve as an introduction to the monetary freedom parts of this correspondence.
The fact that these friends did not achieve agreement between them should make us ponder the conditions, under which such past, present and future exchanges could be more fruitful.
Both did obviously believe to have refuted the other, but could not prove this to each other. In this I belive that B. was much more right than M. - but then I am biased in favour of B., having known him much more and having been largely influenced by him from the time I was 19.
Among the improved conditions should be the permanent and affordable publishing of all monetary freedom writings, well indexed, abstracted and reviewed, also in bibliographical surveys and tabulations of their proposals, e.g. on the characteristics of their proposed exchange media and value standards.
All the uncontested views, insights and ideas should be combined, together with their proofs and references.
All the contested ideas should be published together with their best refutations and references.
An association of tolerant monetary freedom advocates should be formed, pushing towards full experimental freedom in this sphere and until then trying to achieve maximum and permanent publishing for their ideas, proposals and arguments, all properly confronted and interconnected.
Naturally, there should also be established a permanent and large magazine, at least on microfiche and floppy disk but also online and on CD-ROM for further detailed discussions on all aspects of full monetary freedom, with practically unlimited pages for this discussion and an easily accessible and comprehensive library on monetary freedom, for which as few as a dozen CD-ROMs may well suffice.
A suggest a voluntary but as "total mobilization" as possible of all monetary freedom writings, ideas, references and talents, to provide monetary freedom solutions to all the major problems of our times that can largely be solved by monetary freedom.
We have suffered under monetary despotism and its many and distrously large consequences long enough to finally come to the resolution to try to end all aspects of it.
But we should also establish, tolerate or even help preserve panarchies or private payment communities for advocates of central, monopolistic and coercive banking, to do their things to themselves, so that they could continue to serve as deterrent examples for all others. For man is always inclined to repeat old mistakes as if they were bright new discoveries: "Each new generation is a new invasion by barbarians!" somebody once said. Beckerath several times remarked, that communist ideas represent the "original sin" of man, I suppose he meant: against man's own rights, liberties and interests.
Realistic advocates of monetary freedom would recognize that they are outnumbered by money reformers that still try to advance one or the other form of monetary despotism. Only full experimental freedom can serve the rights and interests of all of them sufficiently. Let all of them "fight" - with arguments and experiments, not with laws, court and police actions. Only thus can progress be assured between them.
I am prepared to e-mail this correspondence in one or several files to anyone interested, upon request, free of charge, until it becomes available either online or on a CD-ROM.
I tried in vain to handle it as a single file, just over 6 Mbs, continuously numered, coming to 1197 pages. I was stopped again and again because of shortage of memory and all my file clearing did not clear enough. The computer played up, even to the extent of offering me help - but only in Greek! And several times I lost the file of my last correction effort. So finally I split the file into 6 sections, each about 1 Mb. in RTF.
The letters of B. are in his flawed English, somewhat, hopefully, improved rather than worsened by myself. Ideally, one day, they will be turned into good English by someone.
I possess the copyrights on B.'s writings but throw them into the public domain, inviting accurate publishing of all his ideas and opinions by anyone in any medium, just like B. himself would have done.
M. never objected to reproducing his writings but rather welcomed it. His book publisher was not enough interested in his book to promote it, so in the 1990's at least there were still a few hundred copies left. But when I asked, in a large London Economics bookshop, how much they would offer for the remainder, they offered only, if I remember right, 5 % of what they would charge for the book in their bookshop!
With publishers and bookshops in that kind of condition, we can only be grateful that floppy disks, e-mail, websites and CD-ROMs exist by now, so that one can completely by-pass conventional publishers and bookshops for some of the most important books and even for whole small and special libraries of them.
Beckerath himself had kept his own letters to Meulen separate from the letters of Meulen to him. He may have had his own reasons for this. Anyhow, I followed his practice.
Anyone wanting to place all the letters chronologically or to put relevant letters together may do so easily enough on his own computer.
My main catalogue is a guide to many other writings by Ulrich von Beckerath and Henry Meulen, so far mostly only available on microfiche from me.
PIOT, John Zube
(Panarchy In Our Time or: To each the government or non-governmental society of his or her dreams!)
____________________________________________________________________________________________
John Zube, LIBERTARIAN MICROFICHE PUBLISHING, P.O. Box 52 or 35 Oxley St., Berrima, NSW 2577, Australia, e-mail: jzube@acenet.com.au Tel. (02) 48 771 436. No FAX! Website: www.acenet.com.au/~jzube
LMP's website offers a 2,000 pages (almost 5 Mbs) guide to the first 1545 of the PEACE PLANS issues that LMP has produced since 1977, containing, on about 500,000 pages, libertarian and anarchist books, pamphlets, magazines, newsletters, dissertations, bibliographies, directories, indexes, essays & articles, letter, review & leaflet collections, etc., with an average of over 300 pages per microfiche: $ 1 cash each, post-free for orders of at least 10, or 2 International Reply Coupons or $ 2 other non-cash, with small cheques not accepted. Has any other individual published more freedom texts, more cheaply, in any medium? A supplementary LMP list for Peace Plans 1546-1779 can be found on: http://www.butterbach.net/lmp/
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WILL 300 LIBERTARIAN CD-ROMS BE ENOUGH?
HOW MANY LIBERTARIANS DOES IT TAKE TO FILL A CD-ROM?
How many libertarian Mbs can and will you contribute towards a complete libertarian publishing, library & information service on ca. 300 CD-ROMs, with all the desirable reference works, linked, like the Encyclopaedia Britannica on CD-ROM, to Internet sites? Get entered in the still small but growing list of interested people for the cooperative filling of CD-ROMs, all produced only upon demand. They are, currently, still the cheapest, easiest, most powerful, wide-spread & durable enough alternative medium for all freedom books etc. For further details see: www.geocities.com/libertarian_library/ or write to me. - PIOT, John Zube, Libertarian Microfiche Publishing: www.acenet.com.au/~jzube & http://butterbach.net/lmp/lmp_sup.htm - jzube@acenet.com.au - or: P.O. Box 52 (35 Oxley St.) Berrima, NSW 2577, Australia, Tel.: (02) 48771436. No fax!
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CDROM628words See also: www.butterbach.net/project.htm
LIBERTARIAN CD-ROM PUBLISHING & LIBERTARIAN LIBRARY
WHAT?
Complete libertarian publishing library & information services for all freedom texts not yet cheaply, permanently & easily accessible in any medium, supplementing & listing all of freedom texts etc. offered in all media, or cheaply combining them, with permission, if required.
BY WHAT MEANS?
CD-ROMs, zipped, later DVDs, then still better disks, until all freedom texts can be found on the Internet & large & multiple websites are easy, fast & cheap enough to set up, maintain & download
A public & growing list indicating all interested & inviting independent collaboration or competition.
CD-ROM disks, drives & burners are already wide-spread & cheap. CD-ROMs are commercially pressed for as little as 50 cents. Each can contain, zipped, 200 to 2,000 book titles. A lifetime's freedom reading on a mere 10 CD-ROMs! A complete freedom library on perhaps no more than 300 CD-ROMs!
Filling them will not only require extensive downloading & e-mailing of already digitised texts but also extensive digitising, mainly as a labour of love. Luckily, scanners have become cheap & efficient & division of labour for large jobs is an ancient invention.
WHO?
Anyone interested in contributing libertarian Mbs, keyboarding, scanning, proof-reading, editing & computer skills & copyrights permissions. CD-ROMs, like microfiche & floppies, are essentially self-help media but do mostly need collaborators to fill them. With cheap, lasting, powerful & efficient alternative media anyone can be a publisher, editor & compiler.
HOW?
By keyboarding, scanning, downloading, alone or in association with others. Sending Kbs & Mbs on floppies, partly filled CD-ROMs or via e-mail - to the compilers of CD-ROMs.
By dividing the chores of e.g. digitising whole books into manageable portions between those who like a particular book.
By collaborating with & publicising all who have already taken steps in this direction. See the slowly growing list of interested people.
WHY?
Because it is possible now, affordable, & achievable by enough interested people.
We could use all our resources at our fingertips. We have never had them yet. On CD-ROMs they could be made cheaply & conveniently accessible & linked to current websites. In combination they could be rather useful. Sufficient knowledge could give us considerable influence.
Climbing the mountains of liberty knowledge would not only provide us with a great view but also realistic blueprints, the best programs, strategies, tactics, advice, refutations & references. Remaining disagreements would come closer to being settled. All valuable ideas, discoveries, talents & opportunities could be brought to light & made widely accessible. The Internet can do much but not yet everything or optimally.
WHEN?
As soon as the growing list of interested people contains enough libertarian Mbs to fill the first libertarian & cooperatively compiled CD-ROM.
PRECEDENTS, DEMONSTRATIONS, EXAMPLES:
Few will be as productive with this medium as Dr. David Hart has already been, who produced 4 CD-ROMs on his own, mainly on classical French Liberalism.
Compare Encyclopaedia Britannica & The Library of the Future, each on one CD-ROM. The latter contains over 5,000 titles, not all book-sized, but includes some freedom texts.
There are thousands of music, games & software CD-ROMs.
It's high time for more libertarians to use of this freedom of expression & information opportunity, at least for freedom texts not yet otherwise available.
PIOT, John Zube, 3rd of October 2001.
(PIOT: Panarchy In Our Time or: To each the government or non-governmental society of his or her dreams! See also: www.panarchy.org )
CONTACTS:
John Zube, LIBERTARIAN MICROFICHE PUBLISHING, since 1977, Libertarian PEACE PLANS series since 1964:
www.acenet.com.au/~jzube
Supplementary LMP list: http://www.butterbach.net/lmp/
jzube@acenet.com.au
Also: Research Centre for Monetary Freedom, On Panarchy, Slogans for Liberty. 1779 PEACE PLANS issues so far, ca. 500,000 pages.
John Humphreys, LIBERTARIAN LIBRARY: www.geocities.com/libertarian_library/
AUSTRALIAN LIBERTARIAN SOCIETY: www.geocities.com/libertarian_society
libertarian_aust1@yahoo.com Also: ALS e-Newsletter & ALS Forum
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There arises from a bad and inapt formation of words, a wonderful obstruction to the mind.
Francis Bacon
I would rather call it a self-imposed and terrible obstruction of the mind. Henry Meulen, alas, offered all too many examples for this and he could not be persuaded to drop these wordings but, rather, built his whole monetary system upon them. - But he does not stand alone. This is also characteristic for many other money reformers, even those who generally are rather in favour of liberty. - J.Z., 30.5.03.
I have partly scanned these texts and had partly to keyboard them in. The scanned texts contained numerous flaws, omitted words, sentences, paragraphs or whole pages on which only a few letters or words were recognized. I eliminated the mistakes as far as I could, tried to improve B.'s English - with my still flawed English - but did not try to eliminate or indicate all of M.'s spelling, grammar or punctuation mistakes. You can do that in your copy, if you like.
Nor did I always indicate their paginations or stuck to their paragraph arrangements.
Sometimes I underlined catchwords they had failed to underline. A few times I put words in bold without indicating that they had not stressed them. Mostly I followed their own stresses (extra-spacing by using bold) and underlinings.
I kept Beckerath's separation of his own letters from those of Meulen. Any reader may combine them as he likes.
Not all of the extras, like some letters by others and some clippings were always placed quite correctly with the corresponding letters. Mostly they are ordered by their dates.
I added frank comments, also biased ones, mostly in favour of Beckerath's point of view- and whenever I felt like expressing myself or wanted to clarify a point for myself and perhaps also for others. These remarks are added in brackets and can thus be easily recognized and ignored by those who prefer that.
That was in my first scanning/keyboarding, translation and commenting attempt, which took about 5 months. Afterwards I reread the 20 segments again, eliminating many mistakes that I had previously overlooked. That took about 10 days. I am sure that if I spent another 10 days on a revision, I could still find many further mistakes and would probably still leave many in, unnoticed by me. The Word programme does not always indicate them nor was my concentration and knowledge enough to find all of them at the first try.
But I will not try to spend further weeks on attempts to make these texts as perfect as I could. I rather expect some collaboration from those few to whom I send these texts in the expectation that they would be interested in them.
They should send further corrections to me and I will combine them and pass them on to whoever is prepared to put this exchange on his website or on a CD-ROM.
I would welcome comments by others to these letter exchanges, turning them into a "multilog" and also even more into something that resembles a magazine, with many short contributions from many sources on many subjects, through their "letters to the editor". I could at least offer to microfiche them in my PEACE PLANS series, together with this correspondence, thus helping to keep the discussion on these subjects alive.
PIOT, John Zube, 30.5.03.
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Translation of a letter of Ulrich von Beckerath to Henry Meulen, 1.8.1935, the only one of this correspondence that is in my possession, copied from Rittershausen's collection. Alas, an appendix to page 1: page 1a of this letter is missing still. I will insert it later if I can get hold of it still. I either failed to copy it or mislaid it.
Meulen burnt his correspondence and B.'s files and library were destroyed in an air raid in November 1943.
This letter and the following paper were previously microfiched by me with the 1896 volume of SOUND CURRENCY and some other material, e.g. a special edition by Robert Sagehorn, on Henry Meulen's views, in PEACE PLANS 350 - 354, pages 657-666.
J.Z. 14/6/81, revised: 21.5.03.
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A KIND OF INTRODUCTION
TO THIS LONG CORRESPONDENCE
BY ULRICH VON BECKERATH HIMSELF,
IN FORM OF HIS OLDEST LETTER TO HENRY MEULEN THAT IS IN MY POSSESSION
AND HIS SUMMARY AT THAT TIME, OF THE DIFFERENCES BETWEEN THEM.
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Mr. Henry Meulen, 1.8.1935
London W 12 Your letter of 30/7/35
Boscombe Road No. 19 received today
Dear Mr. Meulen,
our agreement goes still further than you express in the last sentence of your letter. Most of all, we agree upon the principles of the Personal Rights Association, which, in my opinion, will one day play an important role in the fight against communism.
One of the principles of the PRA appears to be that no one should force someone else to do or omit something when these actions or omissions have nothing to do with the security, the property, the job opportunities and the exchange with his friends and customers. To what extent is tolerance economically and socially possible? That is the problem proper.
Let us take an example: You know that the followers of Gandhi refuse to wear clothing that was produced by machines. Both of us hold this to be foolish and believe that Gandhi's followers harm themselves thereby.
But: Both of us would do whatever is in our powers to defend those followers of Gandhi who are to be the victims of an attempt to force them to wear machine-woven cloth.
By now we have both reached a point in our discussion where one can no longer prove or refute anything. In such a case one should examine whether the principles of tolerance could be applied here.
Again an example: The Brahmans cannot … to Englishmen ... (page 1a, is missing here - J.Z.)
Even the most extensive tolerance cannot go so for to permit the promising of services which can be fulfilled only by a happy chance. Example: I go to a lottery agency. "Here are 10 Mark. Give me one that will win." The agent takes lot No. 158 932 and gives it to me. The lot wins indeed!!! And hundred other lots which the agent sold in the same way, do also win! Was the agent a swindler?? I say: Yes! And even if the chance to win were 99%, the agent could not sell them at 100%, in the same way as a merchant may not sell a length of cloth, whose length he does not know exactly, as "10 m. length of cloth!" He may only sell it as a cloth: probably 10 m. long.
These considerations appear to me applicable to the option clause. Some years ago, in a book whose title I have forgotten (I must confess that then I did not recognize the full importance of this subject), that some Scottish banks - or were they English country banks? - had the following option clause on their notes:
Redeemable in silver, upon demand of the bearer, in case the bank is sufficiently supplied with silver.
In case the bank has no silver, it will pay interest on the note until the day of its redemption.
The bearer is also authorised to demand the surrender of a corresponding part of those securities
upon which the bank has issued the notes.
This is a good clause! The bank does not promise any more than she can fulfil. The government should never have prohibited such a clause.
But those option clauses by which the bank obliged itself to pay at a certain date were of quite another kind. The chance (end of page 1b, beginning of 1c) that the bank can keep its promise, may be estimated to be 90%, or 95%, or 99% or even 99.9% (too high!!), but one cannot estimate it to be 100 %!!
Consequently, the bank may not promise to redeem the notes after 6 months.
Perhaps you are of the opinion that such a point of view would be what one calls in German: "Haarspalterei" (hair splitting). That is a matter of opinion!!!
I would like to draw your attention to another important circumstance which so for was not sufficiently noted in the theory of convertibility (redemption, metal cover). At the same time as in Scotland, in England and in America, the option clause was frequently applied, the SILVER CURRENCY and not the gold currency prevailed generally. I still remember the old Prussian "Thalers", which circulated here up to the year 1907. On them was written: "30 equal one pound of fine silver". Thus, whoever received 30 Thalers, had to carry home one Prussian pound (500 grams, while an English pound is only 453,6 grams), and in addition to that he had to carry the copper admixture. A public servant who received his monthly salary in silver coins, risked torn pockets on his way home. The payment of somewhat larger sums of money in silver was considered as an unfriendly act. The public wanted paper!!!! Under such circumstances it was, naturally, quite considerably easier to keep notes in circulation than when the bearer of a note can demand gold. Whoever, in the year 1763 wanted to redeem at any bank notes amounting to 1,000 pounds into silver, would have had to bring a suitcase or a backpack along, perhaps even a wheelbarrow. That was, indeed, a strong obstacle. But, 1,000 English pounds in gold are another matter. In an emergency one can transport them without a suitcase and could fit them even into a briefcase. (End of page 1 c.)
To sum up: I have nothing against option clauses. Only they must not promise more than the bank can fulfil, especially when the redemption is to be mode with gold. Any bank which would promise more could, in my opinion, not be considered as an honest bank, not even within the most tolerant community.
Indeed, in your book you have nowhere expressed yourself against an option clause which confines itself to an obligation which the bank can fulfil.
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The question is now only which procedure is the most advisable one, provided one
a) wants to take the first step to abolish the crisis - which both of us have recognised as a monetary crisis - and
b) wants to prevents the recurrence of the crisis.
Here something else has to be taken into consideration, something that appears at first to be rather strange. Nevertheless, two very sharp minds, quite independently from each other, perceived it: namely W. B. Greene - who was made known again by your quotations - and Zander. This consideration is the following:
Should one not draw the last conclusions from the reasons which speak against the redemption of banknotes on sight??? Does not the same apply to every debt relationship what is right for the debt relationship between the bank and the note holder? Is it right that an individual promises to pay money, although it may happen that money will have disappeared from the district in which the individual resides??
Furthermore, are laws rightful and to be upheld as part of a legislation based upon honesty, clarity and reason, which attempt to enforce what has been found in the special case of the "redeemable" banknote to be dishonest, unclear and unreasonable?? (End of page 1d).
In other words: Should the system of "exclusive currency" - as Greene calls it - be preserved? On pages 14-17 of issue I/1934 of the "Annals" I have examined this question - or, rather, touched it. You have touched it on the top of page 241 of your "Free Banking". Still very much remains to be said on this. But I will not do so now and, instead, return to our special subject.
-------------------------
I proceed from a condition which really exists now, in the largest part of the world, in as differently governed countries as the USA, Russia, China, Japan, etc. Let us take an example:
In Indiana the depression is especially severe. There was a very abundant harvest - and consequently the inhabitants of Indiana starve! What is to be done? Presently, conditions are like in times of war: The government accepts tax payments from the formers in form of produce and distributes these to the unemployed.
Now let us assume that all the laws, which do not allow the inhabitants of Indiana to undertake an effective monetary self-help measure, were repealed. Let us further assume that the inhabitants of the capital Des Moines want to make a beginning and ask you for advice as well as m e.
You would then (if I have understood you right) answer:
Your banks should supply themselves with gold and issue redeemable gold-notes, as I have described in my book and in my letters.
I would answer: Your employers should begin to pay their expenses, especially for your wages, in goods warrants, which would contain the well-known text and, among other things, the following clause:
The issuer makes no difference between his own goods warrants and gold coins when somebody buys something from him. Thus this clause would run somewhat like:
"We, the bread factory Ward at Des Moines, supply for this goods warrant $ 5 worth of bread,
exactly as much bread as we would supply for $ 5 in gold (five times 1,50464 grams of fine gold)."
(End of page 2.)
This the bakery could do within one hour after the prohibitive legislation has been repealed. After another hour the improvement in the economic conditions of Des Moines could already be considerable.
On the next day the most varied issuers of goods warrants will ponder: How can we combine into a community so that not 100 different kinds of goods warrants circulate in Des Moines but less than 100, &, if this is possible, only one kind?
On the second day they will have brought about such an association.
How such a thing functions in p r a c t i c e was described by John DeWitt Warner in his brilliant "The Currency Famine of 1893" in the magazine "Sound Currency", year 1895 or 1896. (It appeared in both years.)
Thus my advice amounts to doing that what our fathers have done in the year 1893 - and, by the way, to a still larger extent in the year 1907.
-----------------------
What would the inevitable answer of the inhabitants of Des Moines be to you???
Our banks should get themselves gold? Perhaps that would work very well - but, how could they do this??
We cannot wait until they have, perhaps, succeeded. We want to eat today, we want to pay our rents today. Your proposal is right now, technically unrealisable.
That would be their answer to you.
(J.Z.: I either read it somewhere or my mother reported it to me: Those tenants in Berlin, who, during the Great Depression, could no longer pay the rent and where thus put on the street by their landlords, managed sometimes to live in tents in the parks of Berlin, obviously tolerated there by the police, because of their plight. Not everywhere else was and is the police as tolerant towards the homeless, in such locations. - J.Z., 21.5.03.)
----------------------
You might perhaps reply: Immediately unrealisable - that may be! But, in a year or in 10 years my proposal can be realized and then it is the best, which you could accept.
And now we come to the point where proof and disproof is impossible. You say: Runs upon private note issuing banks have no great practical importance today. Today one could consider the danger of a run to be zero.
I say: Runs upon private banks of issue are today as well possible as they were previously.
You say: If it comes to a run then the option clause will suffice.
I say: There are cases in which the option clause suffices in a run and there are cases in which it is not sufficient. One may not apply the option clause before one has distinguished between the two.
You say: When the option clause comes into operation then, what gives value to the note, in spite of the option clause, is the hope of the note-holders for a redemption in the future.
I say: No!!!!!!!!! What gives value to the note, even after the option clause comes into force, that is the possibility to use it, immediately in the stores. If this opportunity does not exist, then the note will fluctuate so much in its value and will, moreover, depreciate that much, that it can no longer be a means of payment.
None of us can prove his opinion.
Nevertheless, your highly readable descriptions in "Free Banking", page 21, beginning with the words:
"The employers" etc., and ending with "... to accept the notes", do not leave me without hope that one day we could, nevertheless, agree upon this point, without proof and without refutation.
You say: Even after the option clause comes into force, the confidence of the note-holder in the banker is essential.
I say: After the option clause is applied, the confidence in the banker becomes the most unimportant thing. Moreover, then it is mostly equal to zero. However bad the banker may be, if only sufficient storekeepers
(end of page 4)
accept these notes like they would accept gold coins, and give for a pound note as many goods as they would give for a sovereign, then the public is quite indifferent towards the banker.
I speak here of shops. An equivalent to the shops is, naturally, the administration of a town which declares:
"We accept the notes in tax payments in the same way as we would accept gold coins."
The same applies to a landlord who would say: I accept these notes like gold coins. I need not multiply these examples.
You might perhaps object: But what if the shopkeepers have no confidence in the banker?
I reply: If the shopkeepers have no confidence then it could happen that they will not accept the notes. But if the shops are indebted to the banker then the confidence of the shops does not matter at all. The debtor need not have confidence in the creditor. The debtor has only to pay. The shopkeeper may consider the banker to be the worst kind of scoundrel. He may believe that his vaults would contain sand instead of gold. Nevertheless, if the storekeeper owes the banker 5 pounds, then he will accept notes of the banker amounting to 5 pounds and pay his debt with them. And if, moreover, the banker says right away in the loan contract that the shopkeeper has to accept the notes at par and has to pay his debt with the notes received by him, then the shopkeeper will accept the notes from any buyer and under all circumstances.
It may happen that not the shop itself but the factory is indebted from which he is supplied with goods. As long as this factory is indebted everything remains as I have explained above.
Thus I say: It is not the gold treasure of the banker or the confidence in the banker that allows notes with the option clause to circulate at par
(end of page 5)
but the debt relationship between the banker and his customers is the cause - and the obligation of the customers to accept the notes at any time at par.
It appears that in old Scotland the acceptance of the notes at par by the debtors of the bankers was not expressly included in the included in the loan contracts. Merely "good trading customs" were applied. It would be very important for the history of banking to clarify this point. But for the public it does, naturally, not matter at all whether the debtor of the banker accepts a note because he has to or because he does so voluntarily. (The Four Law Drafts want to oblige the debtor to accept the notes, like gold, and prohibit a discrimination between them.
-------------------------
You continue to maintain: The gold stock of the banker increases the confidence in him.
I state: This increase is so unimportant that the refusal of one newspaper vendor to accept the notes at par could undermine this confidence more severely than 100,000 kg. gold in the vaults can serve to restore it.
--------------------------
I hold: As the possibility to use the notes in the shops like pieces of gold is the real basis of the value of the notes, the banker must not grant any long term loans, that is, such loans in which the debtor may rightly say: I, the debtor, will accept the notes at par in my store or in my factory only when I am finally obliged to repay my loan.
If the banker, nevertheless, wants to provide long-term loans, then he must have a guarantor who would place him in the same position as if he had granted a short-term loan, that is, a guarantor, who will accept the notes at any time in his store like gold
(end of page 6)
although the guarantor has not taken up a loan.
Our views diverge especially for apart in this different concept of short-term and long-term loans. You favour especially long-term loans in many passages of your book and you demand no guarantor. I demand him.
---------------------------
I still want to clear up one small misunderstanding:
I do not think of any obligation of traders in gold (gold smiths) to accept notes in payment for bullion. I only-hold that once gold traders are no longer prepared to accept the notes of a certain bank at par, then this should be a signal for the bank and that the bank should then ascertain the cause. Probably it will be found that the bank has given the gold merchants just cause to value the notes of the bank less than those of other banks. I go further and say: the refusal of the gold traders should be publicised. Then it will be found whether the gold trader was right.
---------------------------
You say: But the old Scottish banks were organized precisely according to the principles whose validity you doubt.
I say: The old Scottish banks only seemed to be organized according to these principles. Several other factors preserved the value of their notes, factors which the history of banking (least of all that of Kerr) have not yet taken into consideration. First of all, one could pay one's taxes with these notes. That was very important. When I know that the tax collector will take my notes, then I do not ask whether the banker has gold or not or whether he grants short term loans or not.
(End of page 7.)
Moreover, the assets of the note-issuing banks were much larger, at any time, than their note circulation. What does this mean? It means that there were in reality very many debtors of the bank who gladly accepted the notes at par or even had to accept them, even if some of the debtors had taken out long term loans. I assert (without being able to prove it): If one were to search in the archives of the old Scottish banks, then one would find that the ready-for-sale goods or services of the debtors of the banks at these times were worth more than the note circulation. For this reason the long terms of many of the loans were harmless. (Nevertheless, a better system would have been possible.)
-------------------------------
We do agree on this that the present crisis is, essentially, brought about by an "insufficiency of money". What I desire, what the Four Law Drafts aim at, etc., that is not simply an "increase of the volume of money", but, instead, independence for all those who desire it from a situation of much or little money in a country, from a fast or slow circulation, from hoarded or quickly spent money. Thus our aim goes much further. But perhaps we agree also on this.
The right to make oneself independent, up to the limit of what is technically possible, of all money hoarders and money exporters - was derived by me from the principles of the PRA.
Now only the following questions remain:
a) HOW does one do this and
b)WHICH would be the BEST way to do this?
--------------------------------
Under our eyes a very important event is in the making: The rise of Russia against the Soviets. Such an insurrection becomes technically possible only when those who rise also provide themselves with a payment system;
(end of page 8)
and it must be one that functions immediately, i.e. within 24 hours.
Does your system offer that??????????
Please consider that the beginnings of this insurrection, namely the numerous issues of cooperative money a few weeks ago, were arranged without gold and have apparently functioned quite well. Otherwise the wrath of the men in power in the Kremlin would not have been as great.
----------------------------------
The laws of England, and those of all countries in the world, grant creditors even then the right to demand legal tender when all legal tender money is hoarded. In my opinion this is one flaw in these laws. In my essay I attempted to clarify this defect. I am pleased to hear that you have dealt with the legal tender problem in your book.
I would be still more pleased if, in the third edition (which will become necessary), you were to extend your examination to the following two problems:
A) What means legal tender for the debtor in case all legal tender is hoarded? In other words, what could a
debtor "force" upon his creditor in such a situation?
B) What can a creditor rightly demand when means of payment are scarce in a country, when e.g. all legal
tender is hoarded?
These are important questions which no legal man has so for answered.
(End of page 9.)
-----------------------------------
I see that I have already arrived on page 10 of this all too long letter.
Summary:
With the brevity, clarity and distinction that characterises all that you write, you have stated in one sentence the main difference between our opinions:
You say: "Before we accept inconvertible private money, we must have some knowledge of the standing and future prospects of the issuer."
I say: No!!!! and I add: Theory and practice speak against this principle!!!!!!
We must be informed about the situation of that person who accepts the notes, more correctly, of the situation of the one from whom we want to purchase something for the notes.
The situation of the one who issues the notes, does not matter - at least not for "the man in the street", whose readiness to accept the notes we have discussed."
With best greetings, yours sincerely, U. v. Beckerath.
____________________________________________________________________________________________
SOME DIFFERENCES BETWEEN THE MONETARY VIEWS OF
MEULEN AND BECKERATH
Compiled by Ulrich von Beckerath in German, on August 12th., 1935, elaborating on his above letter to Meulen on August 1st., 1935.
Prof. Heinrich Rittershausen marked this translation with "GOOD!". But it is only a rough translation by me, J.Z. It is intended to transcribe the German text as well, legible for a microfiche issue, for German readers and in the hope that some better translators will appreciate these thoughts which are of the greatest importance for all current efforts to denationalise money. J.Z.,15/6/81
=================================================================================
1.
MEULEN: The first requirement to keep the value of paper money constant is the confidence of the public in
the issuer.
BECKERATH: Confidence is a highly unreliable and therefore bad foundation for value.
Good paper money must be issued with methods, which assure that its value remains preserved
even in cases of suddenly occurring and widespread distrust.
2.
MEULEN: Even for the first issue of paper money confidence is necessary, the confidence in the
convertibility into metal (gold or silver).
BECKERATH: Indeed, that one can begin an issue based upon a confidence in the redemption of paper money
into gold or silver, has been proven by experience. However, that one can just as easily - nay even
much more easily - begin with an issue of paper money based upon the readiness of shops and
similar suppliers - to accept the paper money like rare metal coins, that has also been proven by a
long and very extensive experience.
3.
MEULEN: It is (although perhaps not morally but, nevertheless, in practice) permissible to keep the
redemption fund smaller than the sum of the issued paper money.
BECKERATH: Exactly the contrary is right. Morality and religion have declared for over two centuries that a less
than 100 % metal cover is permissible. In practice this system has failed. Moreover, it has even
quite significantly contributed to the crisis.
4.
MEULEN: The fact that banknotes circulated in Scotland at par and without difficulties, even after the option
clause was resorted to, proves that the promise of future redemption suffices to preserve the value
of the notes and their capacity for circulation.
BECKERATH: Post hoc, ergo propter hoc!! Assume that the Scottish church would have blessed the notes before
they were issued: Would this oblige anybody to believe that the ability of the notes to circulate
depended upon this blessing??????? The notes circulated without difficulties at par because the
merchants of Scotland and the farmers accepted the notes a par. And why did they accept them at
par? Because they were indebted to the banks and could and had to pay their debts with these
notes at par! The redemption fund was right from the first day as unnecessary as the blessing by
the church would have been. Moreover, the fund was as harmful in its way as a blessing would
have been in its way - for the notions of the people would have been confused thereby.
5.
MEULEN: The risk of the bearer of the note consists in the fact that the bearer may not get the gold or silver
for his note upon presenting it or only after 6 months.
BECKERATH: The risk of the note holder consists in the possibility that the merchants around his residence will
not accept the note like cash.
6.
MEULEN: The risk of the note holder can be compensated for by means of an interest rate, of approximately
1/2 % per month, whenever redemption upon presentation would not be possible.
BECKERATH: When merchants and farmers will not accept the note at par then even a much higher interest rate
will not suffice to counterbalance the discount of the notes which will then occur. Experiences
have been gathered on this.
7.
MEULEN: I maintain my point: The redemption (immediate or postponed) is the essential foundation for the
value of notes. (J.Z.: Meaning: metallic and specifically rare metal redemption, not counting
redemption in goods and services at all! - J.Z., 21.5.03.)
BECKERATH: I maintain mine: The indebtedness of the merchants and farmers to the note-issuing banks and the
reflux (of the notes) following from this, combined with their "shop foundation" is the essential
basis for the value of the notes.
8.
MEULEN: The obligation which a bank of issue imposes upon its debtors: to surrender for notes as many
goods or services as for gold, has only a very minor economic effect.
BECKERATH: This obligation, imposed by the bank upon its debtors, is of very great economic significance. The
insistence upon this obligation enables the note-issuing banks to grant as much in credits as its
debtors possess in goods whose sale is assured. Besides, this obligation assures the par value
between gold an notes as perfectly, nay even better, than a 100 % cover of all notes by gold. It is
this obligation which enables the bank to begin its note-issuing business and to maintain it -
without possessing even a single gold coin. This obligation turns every run into an ADVANTAGE
of the debtors of the bank and of the bank itself, since the run can only be directed towards the
shops and not against the bank.
(J.Z.: And the debtors want to sell as much as they can and can pay their debts to the bank with the
notes of the bank they received in this run. - J.Z., 22.5.03.)
9.
MEULEN: One can provide for a paper money with constant purchasing power.
BECKERATH: A paper money of constant purchasing power is technically impossible.
10.
MEULEN: A paper money with constant purchasing power would be very useful.
BECKERATH: Even if it were technically possible - the economic harm done by a paper money with constant
purchasing power would be much larger then its usefulness.
11.
MEULEN: When the general price level has changed, then it does not matter whether the price changes
originated from the side of the goods or from the money side, whether they were caused by crop
failures or a flood of money, whether through abundant harvests or through money shortages. The
ideal is always: the creditor receives money with constant purchasing power and the debtor pays
with money that has constant purchasing power.
BECKERATH: When a crop failure occurs, then it is only fair that the creditor is disadvantaged by it to the same
extent as the debtor is, in other words, that the prices rise. And if a very abundant harvest occurs
then it is only fair that the creditor gains the some advantage from this as the debtor does. In other
words, the prices should fall in these cases. Gold, especially, permits to account for changes in the
purchasing power of money which were caused from the goods side, with an exactness that is
sufficient for the practice.
A money of constant value would be the sane for the economy as a 'balancing tank' of a ship that
works 100%, even in the open sea. It would mean that the ship would not give way to any wave or
any storm. For a while one could be quite comfortable in such a ship and then the waves would
destroy it.
12.
MEULEN: The English government has the right to declare any good to be "legal tender". It may even declare
a paper, which it considers to be of constant value, to be legal tender. The government may change
any debt contract as it pleases. It may declare silver, copper, anything at all, to be legal tender,
upon its discretion. Knox and Knix may not conclude debt contracts with each other in which a
certain good, which Knox and Knix consider to be suitable, is to be supplied as agreed upon.
BECKERATH: Such things were intolerable even to the Turks under the Sultans, for they rose when the Sultans
went too far. How much more in accordance with freedom and voluntarism is the old law passed
by Frederic the Great, according to which even in case of devaluation undertaken by the State, the
creditor, nevertheless, was not to receive any less in weight of silver than before! Does the
Personal Rights Association teach such a slavish submission to the current English government?
13.
MEULEN: The French government was quite in its rights when once it declared the Assignats to be legal
tender.
BECKERATH: King Louis XVI. was appointed as a guardian of the currency, not as its destroyer. The
compulsory acceptance for Assignats was the beginning of his downfall. Prussian paper money, on
the contrary (and with the exception of a few weeks at the time of Napoleon I.), had never forced
currency (compulsory acceptance at a forced value: legal tender) until Havenstein realized legal
tender in 1909. France's money shortage could have been abolished in a very simple way: by the
introduction of "free banking". The king could have received his taxes very well in private
banknotes.
(J.Z.: All central banks were given great and abusable powers and privileges as "guardians" of the
national currencies and all of them have failed to sufficiently guard their currencies and have
abused these powers and privileges, legally or illegally. Thus by now these central banks should be
deprived of their powers and competed out of existence. - J.Z., 22.5.03.)
14.
MEULEN: A country requires a certain minimum of gold so that its economy can function.
BECKERATH: A currency must be so instituted that the economy it not disturbed even once the last piece of gold
is exported.
-------------------------------------------------------------------------------------------------------------------------------------------
12. 8. 1935
Bth.
____________________________________________________________________________________________
LETTERS OF ULRICH von BECKERATH
TO HENRY MEULEN, 1946 - 1959
(By the man who thought himself somewhat responsible for WW II. See page 59. Letter of 4, II. 1949. He did have a small chance to kill Hitler - and did not use it. - J.Z.)
It is possible that B. corresponded with Meulen almost to his death - but, unfortunately, I do not have any of his letters to Meulen from 1959 to 1969. They may be still buried among the remainder of his post 1943 library, in Berlin. Alternatively, B. had given up corresponding with Meulen in 1959. That seems likely from the spacing of the last letters here reproduced.
They are slightly edited by me, upon retyping or proof-reading of the scanned text, to eliminate some of his English mistakes, hopefully without introducing too many of my own. - Ulrich von Beckerath, 1882-1969, did not like his German writings to be "corrected" or altered or editorially improved - because he had spent much time and thought upon them and, by his own high standards, had optimised them. However, he did not mind help with his English and was grateful to Meulen for the few "translations" he made of his texts into proper English. Thus I dared to try improve them as well, although not very carefully, just while digitising these letters and in spite of being still not as fluent in it as Henry Meulen was, who, unfortunately, included only all too few writings of von Beckerath in his THE INDIVIDUALIST, especially on points in which B. differed from M. on the subject of monetary freedom. - Note also that B. was usually extremely polite and generous with his compliments towards those whom he did appreciate in one way or the other. He had even some praise for some of his enemies, when he thought they deserved it. - J.Z., 7.1.2003.
==================================================================================
U.v. Beckerath, 1. 12. 1946
(1) Berlin-Charlottenburg,
Neidenburger Allee 16,
care of family BLOESZ
Mr. H. Meulen,
31 Parkside Gardens,
London, S.W. 19
Dear Mr. Meulen,
I received
1.) Your letter of the 16 August 1946,
2.) You letter of the 8 November 1946.
I hardly conceive why your letter of the 16 August did not reach me. You used the exact address of my employer and indicated even the number of the room in which I work, and yet the letter distribution department of the house sent the letter back to London!!
And I am by no means unknown at the house. I find only one explanation:
The men and women are member of the United Socialist Party (merely communistic) and I am not, and also declined membership officially, some time ago. Perhaps you think that such reasons should not be taken into consideration. I can only answer: they must, in this case. -
- - - - - - - - - -
I beg you to try once more to send to me a number of the "Individualist". Please use the address above indicated. But do not join the issues to a letter, but send them as printed matter.
I received the number of October in this way and it was a very great pleasure for me.
- - - - - - - - - -
Concerning price control: I am still convinced that besides war, earthquakes and great diseases, such as pestilence and cholera, there can be no greater disaster for a country than price control. And if price regulation is joined with currency folly, as it is in nearly the whole world, then Negroes in the thickest jungles at the Congo, where are neither prices nor currency, live better, more cultivated and less troubled than the so called civilised nations.
- - - - - - - - - -
Before the war I was an adherent of the gold currency, now, after so many years of paper currency with all its terrors, I am a fanatic of the gold standard though not of the gold standard model of 1913.
------------------
I am convinced that Germany could buy food, new machines for the machines taken on reparation account, clothing and what she wants, if Germany would offer the sellers a gold basis.
Even under the present state of affairs that would be possible and even easily possible. I think, that Zander explained to you the ideas which our little circle, authors of the 4 bills, worked out already in 1933. If I would not have to work so excessively (I must reduce my sleep to 6 hours a day), then I would write some articles in one of the papers controlled by pro-reason editors, say the "Tagesspiegel", the "Kurier" and such papers.
I am pretty sure, that they would be printed. But never in my whole life did I suffer such a lack of leisure time as now. (They were not reasonable enough ever to accept his submissions! - J.Z., 7.1.03.)
----
If I had the pleasure to see you, if you visited Germany, that would be the realization of a hope of many years.
----
Today I have not the time to write to you about Zander and his interest in Jewish mysticism. I was very much surprised, that the very logically thinking Zander, that such a matter-of-fact man, has anything to do with mysticism. I hope to be able to write to him.
What you write of Hitler's crimes in treating the Jews is perfectly true, but if governments have no programme that is a real programme, they begin to persecute any class of the people -- the Jews in the greatest part of Europe, the Koreans in Japan (where they were accused to have caused the conflagrations after the earthquakes of 1923), the Germans in the USA (before the war and, I am afraid, the more after) -- but the world's history is full of examples.
-----
I hope to be able to write to you next Sunday.
My best regards to you - signed: U. v. Beckerath.
___________________________________________________________________________________________
U. v. Beckerath, 7. Dez. 1946.
(1) Berlin- Charlottenburg 9.
Neidenburger Allee 16,
care of family Bloesz.
Mr. Henry Meulen, …………
Dear Mr. Meulen,
My economic programme for Germany:
1.) A free trade in gold and silver should be permitted; that means abolition of every restriction in the possession, transfer, importation and exportation of gold and silver in form of coins or in any other form.
2.) A free trade in money of any kind, in foreign bills, bonds, scrip, securities, etc.
3.) Permission to use gold or any kind of standard or measurement of value in the determination of prices for goods (bread not excluded), services, (hired labour not excluded) and debts (leases not excluded ).
4.) Permission to publish offered, demanded or really paid prices or quotations for gold, expressed in paper money of any kind, or for paper money of any kind, expressed in gold, also for goods, securities or any other thing, expressed in any standard or measure of value.
5.) Repeal of all restrictions of the stock exchange, of the money exchange or any other kind of exchange; permission to do business in options or futures.
6.) Abolition of the forced currency, repeal of all laws, old and new, by which people are compelled to take paper money at par or at a prescribed rate for gold. (Forced currency was introduced into Germany as late as September 1914.) (The law on legal tender came into force on 1.1.1910 but gold redemption for a while and was ended with the beginning of WW I. - J.Z., 7.1.03.)
7.) Settling of all taxes in gold, including the taxes for reparation purposes. The financial authorities stipulate from to time a rate for paper money, bank-money and other means of payment, accepted from tax-payers, by which is known the quantity of such means of payment accepted instead of 1 gram of gold.
8.) The quotations of war loan bonds and any other security certificates emitted by the Reich, the States, the towns, etc., will be statistically observed, and if, for a period of three months the quotations are not higher or lower then 5% of the average quotation, the shares are converted into gold shares on the basis of the average price or quotation. (I disapprove all arbitrary relations of the quotation or value of the old loans to the presently used currency or to the future currency.)
9.) Certain taxes should be selected to be paid not in money but exclusively in securities of the loans of the Reich, the States, the towns, etc., especially all property taxes, death duties. etc.
10.) English or American Corporations or both, which, by nationality, are not exposed to requisitions for reparation purposes, and others, erect factories and other enterprises in Germany. These factories and enterprises are considered as exterritorial; are submitted to no tax or duty, but have free communication to England and to America, are also free to employ English or American workers or others. (I see no better and even no other way to supply the Germans with bread, shoes, nails, clothing, tools, umbrellas and so many things, which are not on sale now for three years.)
The factories and enterprises must have their own and sufficiently armed police: A very essential point.
Some of the factories may perhaps use "second-hand machines", which will be cheap enough in England or in America. The Industrial plant in Germany is presently in no better condition than a plant equipped with English second-hand machines would be.
The products of the factories have free admittance to any German place. That can be agreed by private treaties with the governments of the newly organized States.
11.) Every price control for goods or services, hired labour included, is at once abolished.
12.) Every law, regulation etc. by which people are prevented from using their faculties or their property in any manner they themselves think to be the best, are at once abolished. The laws concerning labour-passports are repealed.
13.) Free thought, speech and any kind of expression of opinions or any kind of learning other people's opinions are permitted in the same manner as they were in 1929, at least concerning economic matters.
14.) Bills, securities and obligations of any kind, in which there is no redemption promised but merely a promise is given to accept them for their nominal value at a fixed date or a fixable date in payment of debts or goods or services of the issuing corporation or enterprise are permitted.
------------
These would be the most urgent measures.
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I still have very much to write to you, also about your private affairs, of your unique library, which the war destroyed -- oh, what a pity, what a pity !!!!
But my daily work is go excessive, that I must work on Sundays as on others.
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Most kind regards to you
signed: U. v. Beckerath
Lack of time prevents me to talk about my political programme whose essential feature would be:
Dominion status for the newly organised German States, English princes as governors or an English prince as Chief governor for all States together.
Bth.
Re-reading this letter I find that I omitted an important point at No. 8:
Not only the shares should be treated in this manner, to find out their real gold value, but also the circulating paper money. The price of gold, expressed in paper currency, should be quoted every day. After some time the quotation will be a constant number, supposed that the quantity of the circulating paper money is not considerably increased or diminished. If in the course of three months (or so) the highest and the lowest quotation did not differ more than 5 % from the average quotation, then a new currency should be created, equivalent in value to one gram of gold.
The conversion can be performed in the usual manner if an old kind of currency shall be replaced by a new one: The financial authorities, the railways, the post office etc. keep the received old currency, in this case the Hitler-Mark, and destroy it. They make their payments by the new currency, whose denominations may be 1/4 gram, 1/2 gram, 1 gram, 2 grams, etc. of gold.
After some weeks the traffic purified of the old currency without the trouble of a conversion action at the counters of the banks etc. And the value of the new currency, expressed in units of the old, is found and not ordered.
The public takes the proceeding merely as a denomination and not a conversion by depreciation.
Bth.
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27.11. 1948
Dear Mr. Meulen,
in the common note of the Western powers to Bramuglia is demanded:
1.) Influence (control) of that part of the Bank of the Soviet-Zone which operates for Berlin,
2.) guaranty of sufficient bank- and credit-facilities for the whole territory of Berlin without regard to the limits of the sectors,
3.) supervision of export - and the export licences to be granted by the magistrate.
(I cite the text today published by the daily "Der Kurier", a French licensed paper.)
I think that in these times the adherents of free banking should contribute something to solve the Berlin currency question, although the probability of being heard may also be very moderate.
"The man who possesses a clear program will win", is an old experience. I think that free banking men are the sole economists who are able to represent a quite clear and constructive programme. The propositions of the others do not deserve the name of a programme, being a compromise of the worst monetary plan so far known in financial history, that is still the currency law for the Western sectors and the communist currency principle.
The free banking men of Berlin have no right to speak up; if they had, they would demand:
1.) The right of issuing notes should no longer be a monopoly.
2.) The old German paper currency rule, confirmed by many laws of many German States - "paper currency shall never be a forced currency" - should immediately be restored. It is forgotten that this rule was abolished not before the 1. 1. 1910, when the notes of the Reichsbank became legal tender.
3.) Banking business should no longer be a monopoly or dependent upon permission by the magistrate. (Banking business in the sense of lending money, accepting deposits, granting clearing accounts and other business belonging to the above-mentioned.)
What is here demanded are no privileges for bankers but rather rights for workers. Bankers and bank institutions, as they have been until now, have proven to be incapable of supplying the workers with currency sufficient to enable the frictionless exchange of labour among the different classes of the working people.
Banking institutions of today totter between inflation and deflation without knowing where the limit of the one or the other is to be drawn. They are to be excused, for nobody knows these limits under a system of forced currency.
The amount of "West-mark" in the Western sectors of Berlin is now 200 per capita, but was less than 100 per capita in Germany before the Nazi government. Considering that in West-Berlin more than 3/4 of the wages, all rents and the greatest part of the victuals (food requirements - J.Z.) are legally paid in Eastern money, obviously, there is inflation in the Western sectors of Berlin. Nevertheless, money is very scarce in these sectors, so that many firms now pay their employees two times a month or weekly, who before the currency- "reform" paid them monthly.
Personal and political liberty are in the long run impossible, if the worker is not able to exchange in small parts, of equal amounts (as money is subdivided [denominated - J.Z.]) his labour against the labour and goods of others. Under the present system of note issuing and banking such an exchange is either impossible or depends upon the good will of two or three men, who are not duller than others but who are vis-à-vis a task like that of shooting a bat in a great dark stable (as one of the German economists called it). (Never forgive them - for they do not know what they are doing to us and do it nevertheless! - J.Z., 22.5.03.)
Only abolition of the "cours forcé" of paper money can help and introduction of a free market for every kind of paper money, the word "free market" taken in the sense which it had in the 18th and 19th centuries.
To bring the system of free banking to its fullest extent, the right of every group of workers to choose any person of their confidence as their note-issuing banker should be expressly acknowledged. The readiness of the workers to accept the notes as payment for their services should be acknowledged as a sufficient cover of the notes.
The free exchange rate of the notes and the right of everybody, except the issuers, to refuse their acceptance form the most effective barrier that is imaginable against the misuse of not-issuing, much more effective than any governmental control.
Inflation is technically impossible if the means of payment are submitted to free market rating. A means of payment, whose rate is 99% instead of 100% is refused by the public.
Inflation is possible only with the help of a forced currency.
(Since the end of WW I some economists used the world "inflation" simply in the meaning of "dearness". Now this misuse of the world "inflation" has become almost general in the whole world, although the old sense is not yet quite forgotten in scientific literature. It is not superfluous to remember that the word is taken from the slang of the butcheries of Chicago in the American Civil War. It meant the practice of the cattle-dealers to give the cattle firstly salt, as much as they liked, then to let it become thirsty and then, immediately before delivery to the slaughterhouse, they gave them plenty of water, to increase their weight.
Nobody has a right to bring as good, distinct, old and generally understood words as "dearness" in English and "Teuerung" in German into disuse. The distinction between the two different facts depends upon the use of the suitable words.
Inflation simply means the augmentation of forced currency beyond the amount accepted by the economy, if the paper money were not given "cours forcé".
Dearness is the consequence of bad harvests and similar causes. It is, as all elder economists pointed out, in itself the best means for a return to normal conditions because dearness -- of course -- encourages production and trade. Adaptation of wages to dearness is no obstacle to a rapid return to normal conditions. Wages do require today in England (and in Germany before the Nazi-regime), about 50% of the national product. If wages are doubled, prices increase therefore only to 50%. If then the wages are increased by 50%, prices rise then only by 12.5 %,. If wages are then increased by 25%, the price level rises only about 6% and so on. That may be called a "spiral, but it is not a "spiral without an end".)
The free market of the notes must be acknowledged as the right of every worker to judge about the value of the notes himself and to risk his own property when he accepts the notes for a value over par or agrees to a discount when he pays with the notes.
The right to form a group for the issuing and the acceptance of notes is to be acknowledged as a part of the right to associate for any non-criminal purpose.
The right of free banking includes the right to possess and to legally transfer any material fit for measuring value or serving as a means of payment, gold, silver or other materials always having been used in the economy. The laws of the Western Powers that prohibit the possession or the transfer of such materials are to be formally repealed.
The above right includes the right to subdivide gold or silver etc. into equal parts in the form of coins, either in multiples of the old gold-mark or in grams or multiples of grams.
If Berlin does have factories for minting coins then any factory abroad, that stamps medals, should be permitted to coin gold or silver in commission for the people of Berlin.
Every coin should have inscribed:
a) the weight of gold or silver contained in the coin,
b) the weight of copper or whatever is used alloy in the coin,
c) the addresses of the manufacturer and the commissioner,
d) statement of the thickness and diameter, expressed in millimetres or another international standard measure,
d) the date of coinage (day, month and year).
In one word: The state of the English currency system before 1844 should be introduced with the alterations now required, due to the experiences of two wars, three years of inflation, 12 years of nazi-slavery and the years of ignorance and incapacity, in money matters, in the years before.
Very truly yours - signed: U. v. Beckerath
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(Appendix - page 4)
That import - and export - licences are the most superfluous thing in the world under the rule of a currency without "cours forcé", I need not explain to you, an old champion of free trade.
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"Experts", and other economists that believe themselves to be experts, will find it very insolent if simple workers demand freedom, majority and permission to dispose of their own affairs, if these affairs seem so complicated as the currency affairs. To them may be answered:
Under the rule of the experts, the best times of the national economy were characterised by the destruction of many thousands of tons of victuals, while in the same economy there were many hundred-thousands, who would very much have liked to consume these victuals, if the government would have allowed them to pay for the victuals by the system of free banking. Bad times were characterised by the destruction of many hundred thousands of tons of victuals and the hunger of millions. The difference was great - - admitted - - but was certainly not to the honour of the experts. After so many years of expert-government, the workers have claim the right to take their affairs into their own hands and claim also the right, which President Roosevelt claimed at the beginning of the New Deal:
To make mistakes, at their own risk, in the first steps and learn from their own experiences.
Roosevelt, although probably to be mentioned among the 100 most intelligent men in the USA, committed the mistake to realize the advise of his brains trust. The effect is known.
The effect could not be another one, for monopolised banking and cours forcé darken the path of the most able rulers. Besides that, the New Deal was an experiment without foregoing experiences.
But workers, who claim the right of free banking, in the above-mentioned sense, take a road illuminated by the natural movements of a currency not submitted to a cours forcé and by a century of experience, elevated from the simple observations to true experience by the most enlightened authors, the last but certainly not the least being the author of Free Banking. Therefore, the workers will not be forced to use their incontestable right to make their own mistakes before becoming experienced themselves.
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U. v. Beckerath …. 4. XII. 1948
Dear Mr. Meulen,
Free Banking means also the liberty for everybody to base contracts in general, and banking contracts especially, on any measure of value that he and his contracting party like to agree upon. 100 and more years ago this right was acknowledged, not only in England but in the world, although not expressis verbis. But many contracts of old times, still kept, prove the existence of this old right. Fixing obligations in terms of corn was frequent in agrarian business and, as Adam Smith remarks, such obligations often preserved their purchasing power while contracts, stipulated merely in money lost it. For the rest of the people took, as measure of value, the best known in their economic world, gold in England - - but also silver - - on the continent in most cases silver.
The official standard of value meant merely that this standard was to be applied if no express other value was mentioned in the contract.
Then began, prepared by the law of 1844, which gave the Bank of England a monopoly for the note-issue, a time when paper money got a cours forcé and by that became also a measure of value.
Now, in perhaps all countries of the world, the paper money is the only legally admitted standard of value.
The greatest part of the population, especially the working classes, thinks such prescriptions to be quite right, while peasants and merchants still distrust the paper money as a standard of value and demand permission to conclude contracts on the basis of gold.
Kant says in his political writings that the people form their ideas of right from the existing legislation, while it is the natural privilege of the men in government and administration to form the legislation from the philosophical ideas of the true right.
(A privilege they seldom use, while, on the other hand, only that part of the people, whom Aristotle calls Banausoi is in the habit of framing their ideas from the legislation of the times -- both, in most cases, requiring very many improvements. So the application of right to legislation is, as a rule, entrusted to men of letters and - - as Kant also emphasises - - therefore the right of free speech and a free press is always the most important of all political rights.)
Since the legislation established the unit of the circulating paper money as the unit to measure value with (certainly a very bad law), so that e.g., all prices in the stores must be indicated in that unit and all wages, too,
the people, as far as it belongs to the banausoi, in the sense given to the word by Aristotle, considers paper money as the given and true measure of value as well as the given means of payment.
This idea will not disappear before the cours forcé of the paper money is repealed and even after the formal repeal it will remain for some time, for months or even years. That is true for England and for all countries in the world. For these reasons the unity of paper money must be admitted, also in Free Banking, as a measure of value (besides other possible measures of value - - gold, silver, even copper and grain).
Free Banking will here say: It should not be prohibited, although it seems (hardly? Corner cut off! - J.Z) the best and certainly will be abandoned after some experience with different measures of value has been made possible. At last gold (will? Corner cut off! - J.Z.) be accepted as the best measure. Some German economist (Roscher?) said:
Nature gave men gold and silver as measure of value as it gave them iron as a natural material for tools, water for drinking, oxygen for breathing, the stars for measuring of time and the foot for the measuring of space. The acceptance of gold as a measure of value is therefore not an arbitrary decision.
Herbert Spencer wrote about 80 years ago a chapter: "The Coming Slavery", in which he prophesised in much detail all terrors of a centrally managed economy. But what neither Herbert Spencer nor anybody else seems to have observed is that the abolition of Free Banking laid the foundations for that coming slavery - - for several hundred millions of men, not coming but then existing.
Free Banking presupposes political and economic freedom as well as political and economic freedom presupposed Free Banking. Both must, therefore, be established at the same time, from a new spirit of liberty, a spirit which, in nearly the whole world, seems extinguished now, but in today's England is still not extinguished, as proven by the continued publication of "The Individualist".
Very truly Yours - signed: Bth.
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5. 12. 1948. (I)
Dear Mr. Meulen,
cold fingers and lack of light prevented me from answering all details of your letters. I am very much obliged to you and esteem highly the honour that you took the trouble to translate some of my utterings into English and even will publish them in the Individualist.
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In your letter of the (left open! - J.Z.) you expressed an unfavourable opinion on the gold standard. We discussed the matter some years before the war. Our correspondence is burned (That of Meulen as well as that of Ulrich von Beckerath, by air raids, but at least B. did not burn himself his later correspondence, like Meulen did. - J.Z.), but I remember the main content.
There are different kinds of gold standard possible and each kind contains several details. Perhaps the English word "gold standard", in its present sense and the German word "Goldwaehrung" in its past and in its (somewhat different) sense at present do not mean the same.
In the older scientific economic literature the word gold standard meant in Germany simply, a condition where the debtors were obliged to pay in gold coins if the creditor demanded it and no other kind of payment was agreed upon. Such was the state of law in old Rome at the later time of the emperors and was e.g. the state of law before 1870 in the city-state of Bremen, where a gold standard was introduced though no Bremen-coins were minted. Foreign coins had a fixed exchange rate.
When the central banks came up, then it was considered to be essential for the maintenance of a gold standard that the central bank gave gold coins for its notes at any time. It was held to be sufficient that only a part of the amount of the outstanding notes - in most cases 1/3rd - was held in the vaults to satisfy even excessive demands of the note holders. Of course, this rule was as arbitrary as dishonest and was disproved by experience.
During the war of 1914-1918 the Bank of England did no longer redeem its notes into gold but still gave notes the old relation if anybody brought it fine gold. The obligation to redeem the notes was not formally repealed - as Maynard Keynes explains in his work on money - it was discarded by the practice of redeeming: Everyone who brought large amounts of notes for redeeming had to wait so long that he and his successors at the counter (only one counter was opened for redeeming) lost patience and went home. But formally the standard of gold was maintained during the war. After the war, the obligation of redeeming was formally repealed; there remained only the obligation to exchange gold, delivered to the bank, into paper money, which can produce no danger for the bank. Economists pretended that this condition rightfully deserved the term "gold standard". This system is now accepted by several central banks, also by the American, with the natural effect, that the price of fine gold, expressed in notes, is much higher (on a free market) - - e.g. Mexico for USA or Tangier for England) than the purchasing price of find gold declared and officially maintained by the central bank. The last mentioned circumstance does not prevent economists from declaring that all the central banks or this kind are still on a real gold standard. (I consider that to be a misuse of words.)
If I demand a gold standard for Free Banking, I demand the following detailed role for gold:
1.) Gold coins should not be prohibited. Everyone should have the right to get gold coins stamped and there should be mints in all communities to coin gold in the same way as it was used in 1913. If a community does not possess a
mint, then private institutions should be allowed to coin medals, the size of gold coins, as was allowed in California during the first years of the gold boom.
2.) A gold-clearing-standard should be permitted (not introduced but merely not forbidden) whose essential feature would be the general permission for everybody
a) to possess, sell and buy any amount of fine gold in the form of coins or in another form,
b) to conclude contracts by which the debtor is obliged to fulfil his payment obligation in so much local currency. (Paper notes of private bankers, town money, railway money or whatever may be in use in the community) as at the exchange or at the free market - - the word taken in the sense of Adam Smith - - is quoted for gold.
Example: The local currency is a paper currency issued by the town where the contracting parties live. The town money may be at the nominal value of old gold Marks. An old gold Mark was, by the old German mint laws 0.35… grams of fine gold, or 2790 gold Marks = 1 kilogram. By an over-issue or for other reasons the town money may be at a discount, so that at the exchange for 1 kilogram of find gold in form of known coins 5580 paper Marks of the town must be paid. Then a worker, whose wage is fixed at 10 gold Marks a day, shall be entitled to get 20 paper Marks. Such a system was in use in Germany in the years 1922 and 1923. My own salary as actuary of the Deutschland Rueckversicherungs-Aktien-Gesellschaft, Berlin-Nikolassee, was in 1923 fixed at 80 gold Marks a month. At that time the purchasing power of gold was so high in German, that 80 gold Marks a month was a high salary. I had plenty to eat, was well dressed and bought many books. [Books and clothing were consumed by the flames on 22. XI. 1943.] To tell the truth: the trade unions did not encourage the system. But the higher officials in private firms demanded and obtained it often.)
Obviously, the system is not merely applicable to wages. In its general application it was at that time called "Gold-Rechen-Waehrung" (Gold-Accounting-Currency - J.Z.), which was a good expression.
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Such a gold standard cannot be considered as injurious or oppressive for anybody. It needs no introduction by the government. It is sufficient if the government does not forbid it. If the people in all countries would not be prevented by very hard punishments and the formal declaration of the law, that obligations on the basis of such a gold standard will not be acknowledged by any court, then this kind of gold standard would be an action of the people themselves, introduced in the whole world.
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Today is election-day. Therefore, the electricity works of West-Berlin grant a few hours of additional current. (Reason: The votes must be counted, which can hardly be done at the light of candles.) The additional light enables me to write to you some more words than I would be able to write, otherwise. (Freedom of expression infringed by electricity rationing! - J.Z., 8.1.03.)
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I hope that the Russian gazettes of these days are preserved. If one reads them, then the Western Allies have divided Berlin, also Berlin is not blockaded, the nearly 5,000 tons transported daily by the air-fleet are a pure bluff, etc., etc. They are "documents humains". The nazi-propaganda was far inferior to that.
Very truly yours - signed: U. v. Beckerath
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5. XII. 1948 (II)
Dear Mr. Meulen,
where Free Banking is prohibited or not used, because the economic ideas of the people are not sufficiently developed, there the supply of the individual with means of payment (that is the possibilities of exchanging his labour against the labour of others) depends, first of all, upon the chances in the distribution of the stock of currency.
Suppose the community is inhabited by 10 millions of people able to deal with money, then the distribution of the stock of money, according to the wants of each individual, is no more probable than any supposed distribution is the effect of 10 million tosses of a coin in the well-known game of hazard called "coin tossing". The most probable is 5 millions of "heads" and 5 millions of "reverse". But the odds, that exactly 5 millions of "heads" will come out are practically zero, and the odds, that say - 5 millions and 10 "heads" will come out is a little smaller and practically - - of course - - also zero, the thing considered from an economic point of view. Indeed, practices showed in all periods of history that there, where Free Banking was not in use, nobody had as much currency at his disposition as he wanted - - some having too much and the greatest part of the people not enough.
Secondly, the supply of the community and of each individual depends, wherever Free Banking is not used or not sufficiently used, upon the ideas and the good will of the men to whom the note issue is entrusted.
The experience of decades in many countries teaches that the emission of a forced currency cannot safely be kept in the accurate middle position between inflation and deflation. A more developed theory of currency will even prove that in the case of the issue of a forced currency always one part of the economy is under inflation and the other part under deflation, so that the problem of a rightly dosed emission would be altogether insoluble.
But Free Banking solves the problem with ease: Under-issue at once induces any banker to offer his emission-services to that part of the community which suffers from a lack of means of payment, although it has, ready for exchange, goods wanted by other parts of the community. Over-emission is at once answered by a discount of the notes. Notes that suffer a loss in exchange are refused everywhere and at once disappear from circulation, before they influenced the general price level.
Free Banking is not merely an improvement in banking or note-issue: Free Banking is an essential part of economic life. All restrictions of Free Banking, by law or bay a low standard of economic customs in a community, are a restriction of economic life (and by that of personal and political life), and all other kinds of banking are mere "Ersatz".
Free Banking is a very good and probably the best means of economic education of the people. An economically educated people is able to watch over the economic institutions and the economic activities of the government. Under the rule of monopolised banking and monopolised note issue, it is not the people that watches but it is watched.
If the prices rise, the government, the papers and the churches reproach the people, for having lost their old buying morale and for driving up prices, in their eagerness to obtain real values. If prices decline, the people are accused of saving money in an excessive manner and admonished to "spend wisely", and so to avoid unemployment.
Under the rule of Free Banking, any man, who would try to influence the buying habits of the people by moral exhortations, would be looked upon as 200 years ago the end-of-the-world-prophets were by enlightened people, if the latter were summoned to stop going to the pubs, to save their souls instead and, to make a beginning, to assist the prophet's preaching by a decent donation.
To suppose that monopolised banking and note issue could render the same services as private bankers in Free Banking business, note-issuing included, is about the same as supposing that motor cars and bicycles were superfluous because we have excellent great railways. The use of motor cars and bicycles compelled men to acquire a great quantity of technical and even scientific knowledge, which would never have spread if only railways were in use. So the use of Free Banking will spread a great quantity of economic knowledge among the people which can never be acquired by reading weekly reports of monopoly banks and considering papers on them.
The present political situation leads us to reflect on the best method of war financing. I assert that in times of war, too, a worker, whose wages are financed by free banking, will produce at least five times the quantity of war material that is produced by a Russian worker under the Soviet system of monopolised banking and note issue. The evil effects of this system are more indirect than immediate but, nevertheless, severe. The Russian historians glorify the valour of some Russian armies than vanquished the nazi-invaders though only one third of the soldiers were equipped with rifles, the supply of the 2/3rd not armed being the rifles left by the dead and wounded. From a military point of view they are quite right. Such a valour is nearly unequalled in history. But this fact was no reason for boasts for the Russian arms industry. If there had been private bankers and private businessmen in Russia, they would have easily mobilised the reserves, contained in the incredible waste in production, transportation and distribution.
In the war of 1870/71 Moltke "produced" one dead Frenchman with an expenditure of about 80,000 hours of labour. At that time Germany did not have a system of completely free banking but the number of note-issuing institutions was more than thirty. The French government, with its monopoly bank, needed about 300,000 hours of labour to "produce" one dead German. Of course - the great strategic ability of Moltke and the good training of the German soldiers contributed to Moltke's success. On the other hand, the French Chassepot-rifle was far superior to the Prussian needle-gun, and the courage of the soldiers was equal on both sides.
The "white" armies which fought in the first years of the Russian republic against Moscow were all lead by men that had not the least understanding of war-financing. Their system amounted merely to plundering the peasants, a system which mainly contributed to Napoleon's defeat in 1812. (Explained in the work of the German General Staff: "Heeresverpflegung" (Provisioning an Army), published in 1913. The principle of Free Banking could have been applied to finance the civil war in Russia against the Moscow regime. How? That was explained, although in very general terms, in the book: "Cash payments in Occupied Territories" by the late Dr. Holzhauer, a young economist, who completely understood the system of Free Banking. It is not generally known that Holzhauer's system was applied by the Japanese armies in the first years of Japan's war in China, to the very moderate pleasure of the author, whose intention was mainly to provide a system of finance to German anti-Hitler forces, which were, in the year of the publication of this work (1938), already in the process of being organized. Holzhauer used so general terms that the nazi-department for military literature found nothing dangerous in it and even recommended studying it.
Very truly Yours - signed: U. v. Beckerath
____________________________________________________________________________________________
9.12.1948.
Dear Mr. Meulen,
some time ago I wrote to you about persons who are able to move a magnetic needle by pure will power. Such persons are very rare - - possibly only a few in a million, but they do exist.
If such a natural power as magnetism can be influenced by the pure will of some person, then the question arises whether other natural powers can also be influenced in this way. It may be that there are quite new ways of acting upon things that are seemingly or really without life, by living bodies and by action from a distance, actions that can still be discovered, equivalent to the phenomenon with the magnetic needles.
One may even discover that the action from a distance, as used in this instance, is not bound to a living body but can also be produced by some kind of apparatus and is not restrained to iron or metal but is, rather, of a universal nature.
Probably you have read of the strange procedure of Chinese thieves, who by their will are able to move light objects, say pearls and jewels, and compel them to come so near to them that the thieves can grab them. That agrees with the report of Marco Polo in his memoirs, that he saw, at the court of Kublai Khan "magicians", who were able to transport, merely by their will, and acting from a distance, the goblets of the Khan from the end of a table to immediately before the Khan.
A friend of mine, the manager of the Assurance Company "Volksfuersorge", in Hamburg, Mr. Emil Thiele, saw one of his acquaintances move a box of matches in a similar way.
Systematic exploration of such facts may lead to a procedure by which men, merely by their pure will, are able to bring atomic bombs to an explosion in the air, may, or may not -- but you know, what Indian Fairs are capable of doing.
Very truly yours - signed: U. v. Beckerath
(Note by J.Z., 8.1.2003: Nuclear weapons are set off by H.E. and this can be set off by detonators, which essentially produce fire, i.e., high temperature gases. There are numerous reports that some people can start fires at will, at least not very far away from themselves. Thus they might also be able to set off nuclear weapons nearby - in suicidal attempts, if not at a great distance. But more useful would be a power, from a great distance, to prevent the explosion of any nuclear weapon, perhaps by teleporting sufficient neutron-absorbing materials into the centre of a nuclear explosive device, so that, upon ignition, it would tend to fizzle-out or not come close to the critical mass at all. I would prefer that approach, if it were possible, to exploding these devices. Somewhere I noted a report that a relatively small quantity of a certain element, I forgot its name, if I am right something like 500 grams, if only it could be inserted into a nuclear reactor, could suffice to bring the chain reactions to a stop. True or false? - According to "ANALOG", June 2000, page, one such material is gadolinium. It stops neutrons. - J.Z., 31.5.03.)
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11.XII.1948.
Dear Mr. Meulen,
with mixed feelings I read in "Der Tagesspiegel", that Russia bought in Malaya great quantities of rubber, of which 5,000 tons will be delivered still this year. These purchases must at least raise the quotation of your shares, but it reminds me of the purchase of Krupp canons by the Japanese government before the first world war. A very short time later the German soldiers at Tsingao were killed by these very canons.
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On my daily work to the office, there are some bookshops which I inspect from time to time. Yesterday I found in one of them a book which you probably possess: Arthur Kitson, "The Bankers' Conspiracy which Started the World Crisis". (Note by J.Z.: In his later writings, Arthur Kitson, originally a monetary freedom advocate, became a fan of "Social Credit" notions. I suppose this is one of his works from that period.)
There are many people who, without having read Kant, admit, that every change in the world has a cause and produces an effect. But if they are dealing with economic and social matters they forget that universal law and all evils are there ascribed by them to the wickedness of some persons. No more do they think in terms of "cause and effect" but merely in notions of "guilt and expiation". That habit is hereditary -- I think -- from the time, when the larger part of all men were in a state of absolute slavery, a state which endured perhaps several hundred-thousands of years. For slaves the mood of the master is their fate and they know, in practice, of nearly no other kind of causality, beside some superstitions, by which they explain even occurrences like the kindling of a flame or the shining of the sun by demonic powers, which may -- as every eclipse of the sun "proves" - - fail, if the demon is of a bad humour or attacked by stronger demons. The "personal" kind of thinking is the thinking of the masses. Therefore and always, if there comes a man with a reputation, who explains the evils in a "personal" way, instead of by causes, the he is successful. Kitson is no exception. Add to this that he obviously believes himself what he says. That animates his style, which is already very good, to a high degree of impressiveness.
I regret sometimes that the people do no longer believe, so sincerely as they did in olden times, in the devil. 500 years ago, one would have ascribed a crisis like that of 1932 simply to the devil or, if one was "enlightened", to a bad constellation of the planets (as very many people still do - - I personally know such people, and you do, certainly, too.)
Acts of the devil can be counter-balanced by gifts to priests, but acts of wicked men will be punished if the injured get the chance to do so and that is sometimes a serious thing. Some years ago, in Silesia -- so told me an acquaintance of mine -- in a village some cows died, nearly all at the same time. The most natural explanation for the peasants was to look for the witch, who had killed the cows. Of course, they found the witch and the poor woman was boycotted by the village. If they would have ascribed the death of the cows to the devil, then the priest would have come, would have sprinkled the rest of the cows with holy water, would have received some money, and the affair would have been settled. In France, I read, in the 19th century a sect sprung up, "les satanistes", which no longer believe in a god but strongly in the devil. In India they have had for thousands of years the Siva sects, with the same belief. Perhaps the satanists do the same good in Europe as the Siva followers do in India: their religion prevents much prosecution of classes or races, by ascribing all evils not to classes or races or conspiracies of men - - bankers, workers, Jews and unbelievers - - but to the devil.
Mais revenons à notre mouton.
Kong Fu Tse, asked by a pupil, which would be his first task, if he became a dictator, answered: To ascribe to every word a quite fixed meaning and to prohibit the use of the word in any other meaning.
Kong Fu Tse was a very wise man! (His Luen Yue were among my books consumed by the flames of the conflagration of November 22nd, 1943.)
Kitson misuses the words. He attacks the gold standard, but what does he mean by "gold standard"?? He means by that the legal right of the creditors to claim gold coins.
The right of the creditors (sometimes with exception of the wage-earners) to claim gold coins is, in the scientific literature of the 19th century, demanded as a means to assist the gold standard, to guarantee it better than it would be guaranteed if that right would not be acknowledged. Insofar it was considered as a part of the gold standard, but it was not identified with it. I refer to such a work as "Money" by Stanley Jevons.
Certainly -- and there Kitson is very much in the right -- the said right of the creditors is a highly disastrous right - - in the long run impossible to maintain, moreover, it is even quite unfit to strengthen the gold standard. If in so many (I think in all) countries the gold standard was abolished, it happened because the said "right" could no longer be maintained and was proven to be a great evil and the source of much more and greater evils. But gold standard is - - to repeat it - - by no means identical with the creditors' right to receive gold coins.
The true gold-standard does not need to be legally introduced. It is quite sufficient not to prohibit it. If it would be permitted, people in the whole world would at once fix prices, wages, rents, and whatever may be a subject of valuation - in units of gold weight, grams (which would be the best and was widely used in Germany during the Great Inflation and in the years after), multiples of grams or parts of grams, ounces, etc., such as 1/2790 kg = 1 Gold Mark, 1000/344,44 grams = 1 old Gold Franc, etc.
Certainly, in the beginning of such a legal condition, in which gold is permitted as a measure of value and a means of payment (which the debtor would have the right to "impose" upon his creditor in the form of well known coins, but which the creditor would not have the right to demand, which was the legal state in Germany after 1914 and is the legal state since centuries in the whole East), some people would, for religious or other reasons, not use gold at all, but corn or the paper-money of the bank which they trust, or silver (not the best, but economically possible), or cowrie-shells or something of their own invention. They should have full freedom to do so, supposed that they find friends to contract or trade with them on this basis. With a probability of more than 99% one can expect that experience will teach them, in less than a year, that gold is better, and if they will not accept what experience teaches them, or do not acknowledge their own observations as a true experience, then let them, in three devils' names, continue to exchange on any other basis than gold. We had that in Germany. Corn (in very numerous cases, especially in Pommerania, where corn notes circulated), gas, coal, labour hours, wood, silver, tin, kilowatt-hours (often used), were used as measure of value in long-term contracts, and a collection of all the clauses used would be the most interesting of all unwritten monetary books. But at last even the fanatics observed that a commodity, that is not daily quoted at a reliable exchange market, is as a measure of value far inferior to a commodity daily quoted and whose quotations can be verified by buying or selling small quantities. Only gold was such a good. In most cases - - at that time - - Dollar notes were considered as equivalent to gold, but some preferred the quotations at the gold market of Pforzheim - - an old jewellery town - - where grams of find gold were bought and sold.
By a gold market and especially a free gold market, the merchants as well as the public understood a thing very different of that which Kitson means. In Germany the words "Freier Goldmarkt" were used in the same sense as they were used in English literature, at least until the times of Jevons and probably many years after Jevons, who died in 1882, 47 years old, a loss for the science of economics which is - - I think -- still felt.
A Free Gold Market (Freier Goldmarket) is in the sense of the elder literature firstly a market. Everybody has - - as long as the market is free - - the right to publish at the market his offers and his demands. He may repeat his offers and his demands as long as he found none willing to accept them. From the chapter in Kitson's book "Evil effects of London's Free Gold Market" (page 79 and the following), I learn that K. means by "Free Gold Market" the right of owners of notes to go with the notes to the Bank of England and convert them into gold coins.
Where is here freedom? The owners of the notes are free to claim coins, but the bank is not free (or was not at the time, which Kitson means) to decline the demand. And then: Would not everybody have considered the owners as crazy if they had demanded more gold coins than they were entitled to receive by the Bank Law? And would they not have been considered as even crazier, if they would have accepted an offer of the Bank to give them less? Where is here the market?
Set aside the misuse of the words "Free Gold Market", Kitson is essentially in the right. No right of the owners of notes can reasonably be acknowledged to get gold in form of coins or bars for notes. But, on the other hand, if the Bank has gold in form of coins or bars, it should have the right to buy with this gold its own notes for their face value or a price under their face value. (In debts owed to the bank it should have to accept them at their face value. In the free market it can buy them below their face value. - J.Z., 8.1.03.) That transaction is always possible, and it may be useful if the notes are at a discount. But the redeeming of the notes for their face value is only in that case possible where the bank has, in its vaults, the whole amount of the outstanding notes in gold. That the bank never had. The few cases, where a central bank had so much money ready as to exchange at every time the whole amount of its notes against gold are so rare that they do not have economic significance. But both possibilities have obviously nothing to do with a market.
Kitson gives the example where some bankers drew 11 millions of pounds in gold from the Bank of England and transported the gold to America. He cites from the Banker's Magazine a calculation which teaches that this transaction lowered the quotation of 325 representative investments for 115 500 000 Pounds St. Kitson is quite right to demand a money system by which such events are impossible. But under the rule of a really free gold market (whose locality would not be the Bank of England, but the Exchange or even a room in any tavern - - curb exchange - - if the official Exchange declines to place localities at the use of those who wish to sell or to buy gold) the removing of 11 000 000 L St. would have no greater effect on the quotation of English investments than the removing of a quantity of coal to the value of 11 millions or of any other commodity.
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Kitson does not see that the true reform of the old system, with its note-redemption prescriptions and other misuses, of which the monopoly of the Bank is the worst (though not remarked upon by Kitson - - you are the only writer who noted it) is not replacing gold by notes. (It seems, he means cours forcé notes.)
Free Banking, on the other hand, fills every need for means of payment within some hours after the need is felt - by some newly created Free Banking facilities.
(Note by J.Z., 8.1.03: In his early, 1903 book: "The Money Question, 231 pages, reproduced in PEACE PLANS
Nos. 42-44, he did oppose the money-issue monopoly!)
Kitson will replace the monetary slavery of England - - which he well perceives as a slavery - - by a system which already has shown itself as a much more evil slavery. He is excused because at his time the new slavery was not yet as visible as it is now. Modern disctatorships are impossible without the very system which Kitson proposes, where a single man decides in what measure the people shall be permitted to exchange their goods and their labour against goods and labour of others, where the same man decides the amount of the purchasing power of the notes he grants - - if in good humour - - to the people.
It is astonishing (but for all well trained sociologists not astonishing at all) that more than 9/10th of all reformers propose new tyrannies to abolish old ones.
Goethe says on this:
"Ich habe gar nichts gegen die Menge; "I am not an enemy of the masses;
"Doch kommt sie einmal ins Gedraenge, But if they get into difficulties,
"So ruft sie, um den Teufel zu bannen, Then, in order to banish the devil, they call upon,
"Gewiss die Schelme, die Tyrannen." For certain, the scoundrels: the tyrants."
Kitson, in this respect, is not any better than others. Very few appeal to freedom instead of new tyrannies and the author of Free Banking is one of the very few. Appealing to freedom requires a positive programme of organisation and that requires thinking, experience and the firm will to manage by oneself one's own affairs. Men of the people do not like to think constructively, they do not believe in older experiences ("Before our times there were quite different circumstances!"), and they demand that others conduct their affairs for them. At least 90% of the present European population are the descendants of slaves.
On many details Kitson is in error:
At page 68 he pretends - - as do so many writers, who do not know the history of money - - that money is a creation of law.
But money is, primarily, a creation of the readiness of important creditors to accept it. This readiness may be voluntary or enforced. If the readiness is not given then all the laws in the world cannot achieve turning paper money into a good money. Nero, a short time before his death, debased the denar. But then he ordered that, for paying taxes, old denars must be used. No law could then protect his denar from depreciation. I personally think that this order was an essential factor, one for which the Romans left his cause.
In 1923 and 1924 the German railway issued tickets for one gold mark, two, etc. These tickets could not be redeemed in gold or paper currency. Instead, they were accepted at their face value at the ticket counters. The public preferred this railway ticket money to all other kinds of money.
On page 67 he ascribes the fall of the value of silver during the 19th century to its demonetisation. He does not know that the demonetisation was necessary because the production of silver became more and more a by-product of lead. The more lead was produced, the more silver came automatically on the market. The price of silver was of no great significance for the producer. Kitson confounds here cause and effect.
At page 34 Kitson speaks of the currency in Germany after 1871. He does not know that at that time notes for less than 100 gold marks were prohibited. It is clear that such a foolish restriction must cause a severe deflation.
That a man, who does obviously not take his information from scientific literature, confounds inflation and dearness and deflation and "sinking prices", cannot surprise. One is the effect of the other, but is not the same.
At page 35 he pretends: Inflation has never ruined any nation. It would be a just punishment if a man, who utters such words, must live at least some days under conditions as the workers lived under in the year 1923. But men like Kitson do not consider the workers as a part of the nation. (They do it in theory, but not in their mind.)
At page 34, he repeats the old error, that the increase of prices was due to the increase of the gold and silver stock after the discovery of America. He should have looked at the statistics of the manager of the American mint about the production of gold in the world since 1492. From 1493 to 1520 there were won in the world, per annum (average) 5,800 kilograms of gold and 47,000 kilograms of silver.
Perhaps the population economically concerned with this production may be estimated at 150 millions. (Europe, oriental countries, Africa.) The new production would then be about 1/30th grams of gold per head and year (I make it 0.038666 grams if my calculator is correct: 5,800,000 grams divided by 150 million, or 58 grams by 1500 people. - J.Z., 8.1.03.) and 1/3rd gram silver. (I make it 0.31333 grams. - J.Z.) And this small quantity is supposed to have produce a raise in prices, taken also into consideration that a very great part of the newly won precious metal was absorbed by the oriental countries, where it disappeared in the treasuries of the princes and the rich.
(Moreover, the population increased fast, probably faster than the total gold stock, and so did its total production of goods and services, all requiring additional means of exchange. Moreover the monetary exchange economy had not yet been fully expanded, i.e., did not yet replace all barter exchanges, not even in the somewhat developed countries. - J.Z., 8.1.03.)
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It begins to get dark. I must close.
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Very truly Yours - signed: U. v. Beckerath.
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15.12.1948.
Dear Mr. Meulen,
today I visited the British Information Centre and asked the lady-librarian whether your "Free Banking" did arrive. The lady remembered the book at once and could tell me, that it was already lent out.
Yesterday I visited the American Information Centre in the Kleiststrasse. There the lady-librarian was so occupied, that I could not ask her. But the book was not at the shelves and, therefore, I assume that it was also lent out. But if I come again to the America-House (they have light and heat there), I will ask the lady.
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At the American library I found: "Money and Banking", by Prof. Bradford from the Lehigh University, 2nd edition, 1941, Longmans, Green & Co., an American book and a good one.
Bradford uses the terms market and gold standard exactly in the same sense as the terms Markt und Goldwaehrung (gold standard - - the word is not seldom used for "Goldwaehrung") are used in German literature. Also the world inflation is used by Bradford in its old sense and not simply for "dearness".
I see from Bradford, that Kitson's terminology is not justified by scientific literature of our times.
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What neither Kitson nor Bradford noted is, that the readiness to accept paper-money or cheques is a security for the paper money or the cheques, if the person or the concern or the office, where the paper is accepted, is easily attainable to the bearer of the paper, so that he may utilise it without delay and difficulty, if he wishes to do so, say, because he does not trust the paper for any reason. The German railway-money of 1923 and 1924, issued to an amount of about 1 1/2 thousands of millions (about the income of the railway for 4 months), was such a paper. Supposed the railway-money gets a discount at the free market, at once all persons, who wish to use the railway, would have bought or lent the railway money, would have used it as a means of payment at par at the ticket offices of the railway and would have had a profit equal to the discount. If they had lent the railway-money, the profit would have been diminished for the amount of the interest they must pay. Practically, the railway-money would disappear from the market, by the buying up, together with its discount and could not be re-issued by the railway as long as these notes are offered on the market at a discount -- for nobody takes a note at a discount in the usual business. The trouble is too great.
Very truly yours - signed: U. v. Beckerath
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17.12.1948
Dear Mr. Meulen,
Russia's present economic system is often called "Communism".
Let me remark that this name in Russia's case corresponds neither to actuality nor to the designation in Russia.
Communism is the economic state which is aspired to.
(I suppose that on this point the 13 rulers in the Kremlin and the leading members of the party are sincere.)
It is not without intention that the Russian Commonwealth is called: Union of the socialist Soviet-Republics; they are not called "communist".
Stalin himself (and in consequence many Russian writers) designed twenty years ago the economic state of Russia and the underlying principles as Leninism.
Modern writers call it Stalinism and are quite right to do so.
Under Lenin about 1/4th of the Russian industrial workers were permanently unemployed. Stalin removed unemployment in less than three years (some say in less than a year) and created a demand for labour which still surpasses the supply. Set aside the means by which Stalin attained such a state of affairs, it must be acknowledged that his success is probably the greatest economic success ever attained by a single man. ("Even the devil should not be maligned" says the proverb.)
Stalin himself continues in his writings to speak of "Leninism" - - obviously for modesty, which also must be acknowledged.
In actuality, the Stalinism is pure state-capitalism. State-capitalism has now proved to be able to remove unemployment. Admitted! But the price which the Russian workers paid is high enough: In most countries of the world the unemployed live better than the employed in Russia. This fact, in connection with the very high degree of employment, should be analysed with the means of Western economic science.
In every case State-capitalism should neither be called communism nor socialism.
Very truly Yours - signed: U. v. Beckerath
(Here he should have at least mentioned the many millions of forced labourers, largely unpaid, in the slave labour camps of the Soviet Union. They, like the conscripts, and the masses of bureaucrats, could hardly be considered as being productively "employed" in the Western sense. Nor are those who are forced to attend schools, although they would rather do some paid work. - Was he still employed in the Eastern Zone, then, and thus under its censorship? - J.Z., 8.1.03.)
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U. v. Beckerath …. 18.12.1948 (I)
Dear Mr. Meulen,
I think, we agree that Free Banking means real freedom in all banking business, the word taken in the sense which it had in the time of 1844. To this freedom belongs the freedom to offer payment in notes, this word taken also in the sense of 1844.
If there are enterprises with a greater turnover than a private banker may have, without ceasing to rightly claim the term banker, then such subjects must have all the freedom which a banker may justly claim, supposed that these subjects are sufficiently supervised in all details of their business and the results of the supervision is published, in short intervals, at least weekly - - if possible daily. A further condition may be that everybody must have the right to participate in this supervision - in a manner that is not vexatious. Such firms are railways and similar enterprises, department stores and factories. Some decades ago, when currency was short in Germany, due to the foolish prohibition of notes in smaller denominations than 100 Marks in the Bank Law, it was difficult for employers to find currency for wages. Thus such employers as Krupp in Essen helped themselves in this way: They founded a cooperative store for their workers and took care to provide this store better than other stores of the town were provided, so that the workers had a real interest to buy at that store. Then they paid their workers with cheques or notes or certificates - - whatever name may suit - - subdivided like money - - which were accepted as cash at the cooperative store. The store paid its suppliers in the way usual in wholesale trading, where no cash currency is required.
I found the same system in the North of France at Hénin Liétard (a great mining centre in the Pas de Calais) and heard from the miners that the system was widely used in the whole Pas de Calais. That was in the years from 1915 - 1918, when the German government called me to the Armierungsbattalion Nr. 38, I. Company, where I helped it to lose the war. (For a year I managed the military library and reading hall at Fouquières - lès - Lens. You may imagine what kind of books I furnished the soldiers. Kant, "About an Eternal Peace", of course, was among the books and was a "good seller". In 1917 the battalion moved to the south and I had to move with it. I can say that many comrades at Fouquières regretted that the battalion moved, because they understood me very well.
At Hénin-Liétard the Krupp-System was used in a way that must be called tyrannical. The workers were lodged (very well lodged - - to tell the truth -- ) in great blocks, consisting of a dozen or so houses (very well built houses), with a great courtyard and a garden for each house in the middle of a block. But the block had only one entrance, and the porter examined every worker that passed the entrance (more so the women) and asked them to open parcels brought in. If he found items that were obviously not bought at the store of the mine, then he reported this to the Mining Company (Société an. des Mines de Courrières) and the worker was liable to lose his job.
The payment was not in certificates but in currency. That may have been the true reason why the system was introduced. The system enabled this company to use constantly the same fund of currency and therefore the company was independent of the bankers. I asked the workers whether the quality of the purchased goods was bad. But they all assured me that the quality of these goods was as good as it could be, and that they would also buy at the store if there were no supervision at the entrance of the block. But they added: We realise very well that we could exercise a pressure on the company by the threat to no more buy at the company's store. Through the system used by the company it is nearly impossible to exercise such a pressure. The company would have attained its aim much better by paying the workers with certificates as Krupp did. But this kind of payment was prohibited by law (as it is now in Germany and in nearly all countries of the world) because the socialist parties at that time declared:
The economic power of the bourgeoisie should not be augmented by granting it the power to make its own money. (Sheep!)
I read in an old report from a currency congress (burnt with 3,000 other books) - - if my bad memory does not deceive me, it was a congress held in 1878 - - that in Belgium the system was much improved. There the cooperative stores lent the employers the amount of certificates required for paying wages (or a considerable part of the wage amount). Now the thing had another face: It was the worker himself that exercised banking power and some even considered the system so framed as the beginning of a socialisation (which could easily have come true if the workers would have fully understood the power they had in their hands. But - - as is usual in such matters - - the masses of the workers were quite indifferent, the women were a little bit dissatisfied and said: We want to buy where we like and not where the cooperative thick-bellies like, and today the system is sunk into oblivion. - - I do not know the cause of this in detail.
One thing is certain: Granting the worker a legal claim to what W. B. Greene called "exclusive currency" is a severe restriction to Free Banking, the word taken in its widest sense, and for this reason is a severe obstacle to true socialisation, the word taken in the sense which it had in the earlier scientific literature, where it was by no means restricted to State capitalism.
Modern laws, e.g. in Germany, grant the workers the right to legal currency (exclusive currency), but do not grant him the right to renounce the exclusive currency and to agree with his employer upon payment, say, in notes of a banker whom both parties trust.
The trade unions and the parties of the workers represent this miserable state of affairs as a success of the workers' movement of the past. "We compelled - - they say - - the bourgeoisie to use State money instead of enriching it by the making of private money."
That should be sufficient to state: One of the greatest errors in Marxism is the opinion that the workers, by their position in capitalistic production, have become a revolutionary class. The still occurring revolts of workers have been no true revolutions, and if a revolution will change the industrial injustice into industrial justice, it will be done by the educated classes of the people, with participation by the educated part of the workers, not in a single day but so quickly, that every one may hope to experience it. Nor will it happen in all parts of the economy at the same time, but by conquering one part after the other, probably silently and without any bloodshed.
To illustrate this expectation, I may remind you of one of the greatest revolutions in history: The revolt of the German people against the government's "exclusive currency" in the years 1922 and 1923. Every day new thousands declined the notes of the Reichsbank and accepted other kinds of money or money-substitutes. If at that time a programme of Free Banking had been known to the public, thousands of Free Bankers would have replaced the Reichsbank, the crisis of 1930/32 would not have occurred, Hitlerism would have been impossible, no war would have happened, Germany's towns would still stand, I would still have my 3,000 books, you would still have your library - - probably with a second copy of Greene's "Mutual Banking" - - a terrible loss - - and we would correspond upon details of Free Banking in Germany.
Free Banking is not merely an improvement in banking: Free Banking is that which puts the economic pyramid upon its foundation. With it, it requires to further assistance for its stability. Instead, it has been made to stand on its top, where every breath of air upsets its balance, in spite of all assistance. If that is true then the following conclusion is true also:
Free Banking must be recognized as a right of men and citizens, firstly by the UN, who now tries to improve the work of 1789, then by the constitutions of all countries, firstly by that of Germany, whose provisional constitution, framed in these days at Bonn, is valueless in style, content, aims and even improvement options. (I suppose that you read it.) Economic rights of individuals are not even mentioned in it.
The Personal Rights Association should apply to the UN to recognise the right of Free Banking and of Note Issuing as a primary right of man. The Personal Rights Association could add to its application that all rights of men cannot be maintained if the right of Free Banking and of Note Issuing is not formally acknowledged and practically exercised.
And The Individualist should publish the text of the application.
Be assured, dear Mr. Meulen, it would not remain unnoticed.
I also see no reason why the Association should not apply to the parliaments of all countries in the same way as it applied to the UN.
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Very truly Yours - signed: U. v. Beckerath
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18.12.1948. II
Dear Mr. Meulen,
the habit of thinking in the categories of "cause" and "effect" is only found at the end of long scientific training. The people do hardly think in these categories. Even scientists do not always think in the categories of cause and effect if they are concerned about matters outside their usual sphere. There they are, as the people are, inclined to take the events or the changes as the intentionally performed work of some persons.
In economics, Karl Marx, certainly a scientific thinker, furnished an example of this easiness with which even philosophers turn to "personal" thinking in their own domain if they met with details not to be subsumed under the rules or notions they habitually apply. Marx derived all economic misery from the separation of the worker from his instruments of production. But in his book "Das Kapital", where he describes many single inconveniences in factories, mines and estates, he describes them always as the effect of the wickedness of the capitalists. The temptation was near at hand, for evils like "the factory leg" have obviously nothing immediately to do with the separation of the worker from the instruments of his production.
For about 20 or 30 years the detection of the "cause" element in accidents, even presently still and simply ascribed to the guilt of those concerned, has become a special science. If at the time of our grandfathers a worker suffered an accident then it was the usual way to judge about it, that the worker was not cautious enough. Today a well-trained engineer inspects the place where the worker suffered the accident and finds, perhaps, that the lighting of the room was insufficient and measures the degree of insufficiency. Probably neither the workers not the employer had noticed this insufficiency.
These seemingly purely theoretical considerations apply to an important feature in the economy of Russia and, therefore, to the economic and political situation in the whole world. The rulers of Russia do not think in the categories of cause and effect, they think in terms of "intentions" and "guilt". That applies not only to the rulers in the Kremlin but still more so to the rulers of 2nd, 3rd, etc. class, down to the overseer in a mine. All that does not harmonise with the "plan" is "sabotage", every delay, every running off the rails, every breaking of a tool is considered to be intentional by those who are concerned and is punished, at least in a concentration camp, and often by punishments that amount to capital punishment, as the work in the Uranium mines.
How long can such a system endure? Experience shows, that it endures as long until those threatened by it find the ways and means to revolt against the rulers. If they do not find these ways and means then that system may endure for centuries, as taught by the history if Imperial China, where every failure in administration or on the battlefield cost the life of the "guilty" official or general. If the supreme ruler believes in the system of "every failure is due to guilt", then the life of his next subordinates are always in danger. But these subordinates are the true rulers of the country and, therefore, it is not rare that they succeed in removing the supreme ruler. A classical example is the history of the National Convention in the years 1793 and 1794. Robespierre and his "clique" were removed at the very day when about a dozen deputies detected that their names were on a list of Robespierre of those to whom he believed guilty of the slow progress made in "renewing" society according to the principles of Rousseau. (The romantic story of the detection of the list, by the mix-up of a fancy dress at a masked ball, was often told and sometimes filmed.) Two days later Robespierre was guillotined.
The neighbours of a state like the Russia of today may always suppose that a great part of the ruler's subordinates or of the leaders of the armed forces feel themselves threatened and will act anyway against the ruler if they would see any possibility.
It was the great merit of the Romans firstly to suppose such conditions to exist in all despotic States with which they had relations and, secondly, never to apply the principle: every failure is due to sabotage. The application of these lessons of history is near at hand: Induce the military or the civil ruler of a province to secede from Moscow. Offer him help in a way that appears evidently possible to him; assist him by a good social programme (aim: in 30 years or so the Russian workers are to live as now the Americans life), and the Russian government will be no more secure in the Kremlin than the Tsars were in their palaces at and around St. Petersburg.
Such considerations are not beyond a scientific management of foreign policy.
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Very truly yours - signed: U. v. Beckerath
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U. v. Beckerath, …. 28. 12. 1948. Your letter from 14-th of December, received at 25-th December.
Dear Mr. Meulen,
concerning: Long-term credit by Free Banking.
I think we agree in the following principles:
1.) The banker and his debtors form an economic unit. The nature of such a unit was, in Germany, first set in the right light by Knapp In his work: "Staatliche Theorie des Geldes" ("Theory of money, considered from the standpoint of the State.") Knapp called such a unit - - it need not be a registered society - - whose members
accept a means of payment as if they would receive cash money, a Zahlungsgemeinschaft" (perhaps to be translated as a "payment community").
In the case of a forced currency, the inhabitants of that territory, in which the forced currency must be accepted, form a "Zahlungsgemeinschaft". Those persons also, of whom a note-issuing banker may be sure that they will accept his notes at par, do form a payment union.
I do not know whether in England or in America the notion of a "Zahlungsgemeinschaft" has been used in the theory, of money. In any case, it is an interesting new notion and of practical value.
As an example of an interesting "Zahlungsgemeinschaft" I would still mention the inhabitants of old Prussia until 1871. Until this year all gold coins of the continent were accepted at the public pay offices, at a fixed quotation and with very few exceptions. If England created new coins, she supplied, at the same time, also Prussia with gold coins. The same was the case with France and other countries. The inhabitants of Prussia formed a payment union with the whole of Europe and the USA, by the wise monetary policy of the old statesmen of the school of Freiherr vom Stein.
2.) It Is the task of a banker to help his customers, especially his debtors and his creditors, to use their goods, labour and claims as ready money or - - if they preferred this - - as a money employed in the future.
So far we certainly agree.
Perhaps we do not yet agree but certainly will agree later on the following principles:
It is essential for the working of Free Banking and does constitute a fundamental principle that a debtor of a note-issuing banker is formally obliged to accept the notes of his banker at par, regardless of how they are quoted at the market or at the exchange, at least to an amount equal to his debt + a little more, say 10 % or 20 % or so.
It is essential, too, that every businessman knows up to what amounts the debtor is ready to accept at par his banker's notes.
It is further essential that the debtor of the banker obliges his debtors (I called them debtors of the second order) to likewise accept the banker's notes at par, at least up to the amount for which he is indebted + a little more.
Theoretically, the debtors of third and higher orders should be loaded with the same obligation, but in practice the possibility to secure an acceptance at par by indirect debtors of the banker will cease at debtors of second order. If it would be possible to secure the readiness of owners of goods, skills or claims, when they are debtors of any order, then the banker's notes would, as far as what the par value is concerned, be secured like it is in a forced currency.
I know that we do not as yet agree but I strongly hope that later we will agree on the following principle:
The debtors of a note-issuing banker should be so selected, that their goods or services are of the kind called in German "Gegenstaende taeglichen Bedarfs" (daily wanted consumer goods or services). It there arises any distrust in the notes - - say, by fear of a war, of a revolution, an invasion - - things which have nothing to do with the banker's honesty - - then the note holders should have the option to "realize", without much delay, his notes into goods or services. It that principle is followed, even in times of panic, then the notes cannot get a discount.
It is remarkable that if the principle is followed then a tendency arises - - feeble as it may be - - for opportunities for labour and even for the banker. Of course, the notes which disappeared so quickly from the circulation must be replaced, for even in times of panics the people cannot be without typified means of payment.
(The stores had rapidly sold out goods, in this "run" upon their stocks and they must put in replacement orders, which require labour to be fulfilled. To that extent business as usual goes on. - J.Z., 9.1.02.)
It the banker is the municipality of a town, car yards and watchmakers must not be excluded from the possibility of becoming debtors of the bank. (In old times towns as bankers were not an unheard-of thing.) The same would apply if the banker has a very wide-spread sphere of debtors, so that the probability is more than 90 % that, in times of panics among the note-holders, there will also be people who buy a car rather than keep the notes in their pocket.
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That the debtor of the banker should always have the right to repay his loan is a principle which was known, obviously, already at the time of Adam Smith and was generally practised. I conclude that from the report of Adam Smith in the chapter "Of Money" in his "The Wealth of Nations".
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You are quite right to demand that the regular publications of the banker should also contain details on the length of the agreed-upon time for the repayment of loans. But here I go farther than you insofar as I
1.) firstly demand, that not only the average length should be reported, but that the report should contain what in German is called a complete "Liquiditaets-Bilanz", (Liquidity balance - J.Z.)
2.) an indication of the length of every loan.
The time factor is rarely considered in economic considerations and if it is considered then not in a sufficiently detailed manner. But in Free Banking the time factor is decisive.
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The average length is not sufficient, which becomes evident from the following example:
One million of money units (marks, pounds, dollars, etc.) is lent out in notes for - - say - - 20 days (the average length of loans at the old Reichsbank) and 100,000 units for 1 year. Then the average length, exactly calculated, would be:
1,000,000 x 20 + 100,000 x 365.24 = 51
1, 100, 000
That would seem to be a little too much, but would not seem in to bring the note holders into danger to lose with their notes. But if the old paper money theory (emphasised by Adolph Wagner, by Michaelis and nearly all others in Germany) is right, then the 100, 000 units constitute not only a danger, but the certainty of bankruptcy.
I think that, in reality, the banker will not even calculate thus. He will reckon as follows:
10 000 loans of 100 units each. (Let us suppose that the numbers were correct.) Each loan has a length of 20 days.
One loan of 100 000 units. (Let us suppose that this figure would also be correct.) Then, the banker calculates:
10, 000 loans at 20 days length
1 loan at 365.25 days length,
average:
10, 000 x 20 + 1 x 365.25 = 2000365,25 : 10,001 = 20 days average length.
10,001
Probably the most honourable banker would calculate in this way and so deceive himself and others. Honesty does not include the knowledge of the theory of averages.
Darkness.
(Meaning: Now darkness prevails again, due to rationing of electricity supplies and I cannot continue writing. - J.Z., 9.1.03.)
___________________________________________________________________________________________
29. 12. 1948.
For the purpose of my demonstration I suppose that the debtors are obliged to repay their loan every day with 1/20th of the original amount, so that at the 21st day every loan is repaid.
A regular repayment or at least a repayment in short intervals was the usage at the old Scottish banks as reported by Adam Smith.
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That the loans were to be repaid in notes of the banker is essential. Not in all cases will the debtor be able to procure enough notes of his banker for his repayments. Then he may pay with other means of payment (coins, treasury notes, other "local currency"), but with a little additional amount, say 1/1000. That additional amount is necessary for the banker. He must buy at the market or at the Exchange his own notes - for coins, notes of other banks, etc., so that a continuous demand for his notes is maintained in the community. This demand may come from the debtors or from the banker himself. The buying of his own notes costs something for which the banker must be compensated by the debtor.
The principle is old. It seems that it was first used in Prussia in the year 1815, after the Napoleonic Wars. In April 1815 a Prussian law prescribed that 1/2 of all taxes must be paid in paper money (Tresorscheine). For every Thaler that was paid in silver instead of in paper (as far an the 50 % were concerned) the taxpayer must pay an additional "Groschen", which at that time was 1/24 th of a Thaler, and 1 Thaler was about three old Shillings.
So the additional amount was equal to 1/24th or about 4 %. (In our days a smaller additional amount will be sufficient.)
Some years later the additional amount for the Prussian taxpayers was reduced and some decades later it had fallen into oblivion.
But the aim was attained. A continuous demand for paper money was created, so that sometimes the Prussian paper money quoted a little over par at the exchanges, e.g. at Frankfurt on the Main. And in reality the State was bankrupt!
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For the purpose of my demonstration I have sketched a model of a report to be published by the note issuing banker,
A.) for the case that he operates on the plan which I think right and which would have been the plan of the Cheque Banks according to Bill IV of the celebrated "Four Bills". (Zander, the apostate, was one of the authors.)
B.) A Plan according to your ideas on granting long term loans by Free Banks. I used as example the length of one year, although you had, probably, in mind a length of several years. But the case where one year is adopted as a normal length shows - - I think - - that already such a length is economically impossible.
If the average note holder reads a report like the enclosed, he will - - I think - - trust the value of the note. And if he does not trust it, then he goes to one of the stores or firms published (they are also, recognisable by posters), buys what he in need f and is thus rid of the note and his distrust.
The only effect of his distrust is an acceleration of the turnover in a store. The storekeeper - - perhaps also distrustful, takes the note, pays with it a part of his debt to the banker and the thing is insofar settled.
Very different the situation of a banker who operates on a plan such as yours.
If the note-holder reads m report like that here enclosed, he will he terrified. At once he will come to the banker and demand gold, for "The last is bitten by the dogs!" (Den Letzten beissen die Hunde.)
In a banking-business on the basis of the Four Bills gold is quite useless, at least in the vaults of the banker.
That gold is not forbidden in the community, that is essential.
----------------
Darkness.
30.12.48.
From the preceding it should not be concluded that a note-issuing banker's help is unnecessary for procuring a long-term credit. But the security of the notes should, in the case of long-term credit, not be that, what the debtor has to offer as a security, say a house, a factory, machines, etc., but the security should be that what the man possesses who will be, at last, the creditor (*) of the debtor. Let us consider an example.
(*) (J.Z.: He should he have said "debtor" here, I believe. Lastly any debtor can repay his debts only out of his income, i.e., out of what his debtors owe to him. - J.Z., 9.1.03.)
Suppose a Building Society wishes to build 100 houses, each worth L 5,000. The houses will be sold through the well-known hire-purchase system. If a tenant pays monthly L 48.80 and that punctually for 144 months, the house is his property at the end of 12 years.
If no interest would be demanded, a monthly payment of 5000 : 144 = L 34.72 would be sufficient. The difference of 48.79. - 34.72 72 = 14.07 secures an interest of 1/2 % monthly on the outstanding debt. (An interest rate of 1/3 rd % monthly would require a monthly payment of L 43.78)
The Building Society wants L 500, 000 to perform its program.
Now many people say: Very simple - - let the banker lend the society L 500, 000 in notes. The society repays the loan in 144 instalments of 100 x L 48.80 =L 4.880 or a little less, if he in willing to receive less than 1/2 % interest monthly on the rest of the debt. But that in economically impossible.
Adam Smith speaks about that principle of "raising money by circulation" in his chapter "Of Money". There he says: A note-issuing bank is an excellent creditor for the debtor of long -term credit, but a debtor of long-term credit is an evil debtor for the note-issuing bank. Here Adam Smith does here not speak of the trustworthiness of businessmen in the usual sense. He speaks only of the economic nature of that kind of loans.
Possible and desirable is another way.
The banker, the building society itself and their friends look out for persons or firms that possess goods or are ready to render services (say a bus line) but wish to receive the equivalent not at once but later and to whom the plan of liquidation - - 144 terms - - is convenient. The bus line may have a demand for its superannuation fund, other people for other purposes. Then the banker sells the enterprise some shares or certificates or whatever they may be called, which are equipped like gilt-edged papers usually equipped. The bond contains a plan for redemption by drawing, as it usually is. The buyer of the bond obliges himself to pay it in lump sum at a fixed date or by instalments. (Selling bonds by instalments is prohibited in most countries, but such a prohibition goes too far.
Now the banker lends to the building society so much in his own notes as he is able to sell in bonds. Say, within a week he sells L 20. 000 in bonds and under conditions, that make sure that the buyers will have paid the bonds within one week or two.
Then the banker can lend the building company L 20.000 in notes.
To the buyer of the bonds he says: I accept as means of payment either cash money or - - and I prefer that - - my own notes.
One may suppose that the building society spends the received notes in a short time - - perhaps in two weeks - -for wages, materials, services of architects, etc. The notes will find their way to the people that bought the bonds. If not, and these people pay the banker the bonds by other means of payment, say cash, then the banker buys at the market or at the Exchange, his own notes for the amount he received in cash or other means of payment.
The principle is: There shall never he more notes outstanding than are covered by debts or at least by the readiness of people (expressis verbis stated) to accept the notes, at par, in their usual business. In case of arising distrust, the note holder must always have the option to get rid of the notes by buying things that are daily wanted.
I explained this kind of banking in my dissertations, published in the Annals of Collective Economy (Annales de l'économie collective), edited by Professor Milhaud, who got them translated into French and English. (The English translation is so bad, that it is nearly unintelligible. The French translation is excellent.) I regret that all copies in my possession are burnt. But the editor, Professor Edgar Milhaud, Genève, certainly still possesses copies.
Selling bonds to persons who wish to buy such bonds and to permit them to pay the bonds with the bankers own notes, if such notes are received in the usual business of the buyers, that is all the help the banker can grant to the buyers on the one side and to the society on the other. But this help is powerful.
If - - an extreme case - - nobody in the community wishes to buy bonds of the kind the building society can provide, then the building society can get no loan from any side, neither from a private person not from any banker.
If the banker, nevertheless, lends to the building society notes in the hope that these notes will not return to him, because he is known as an honest man, then he deprives some (unknown) person or persons of the amount of outstanding notes. He diminishes the stock of saleable goods and he augments the amount of the currency of the community, which means a private inflation as long as the notes are in circulation. But such private inflations can never continue for a long time, I think for no longer than four weeks, if the banker publishes his affairs. (Details of his issues. - J.Z., 9.1.03.)
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The old Scottish bankers were not so cautious as is required by the here explained principle. By the following reasons they are justified:
1.) The standard of the country was a silver standard.
A sum of 100 shillings in silver tears the pockets in which the sum is transported, if the pocket is not made of leather, as, indeed, was usual at that time. But for greater sums people preferred paper money as more convenient. If paper money is preferred to silver money then the banker is much less threatened by a run. Where gold coins are the general means of payment the situation is very different.
(I plead for what the German economists call a: "Parallelwaehrung" (parallel value standard - J.Z.), which is not the same as a double standard), or Bimetallism.)
(J.Z.:In Beckerath's monetary freedom system there would be no fixed rate or legal tender between the two metals but a freely floating rate! Thus the difficulties frequently experienced with Bimetallism would be avoided. - J.Z., 9.1.03.)
2.) The "option clause protected the bankers nearly to 100 %. The time provided in the option clauses was generally 6 moths. (From that I conclude that the bankers did not grant loans in notes for more than 6 months/
3.) The circulation of goods as well as of money was at the time of the old Scottish banking much slower than it is today.
4.) A banker at the time of the old Scottish banking was a very powerful man. Whoever presented him with a great amount in notes for redemption became his enemy - - a serious matter, seeing than such an enemy could not hope to get loans when he needed them. That was even the case at the old Prussian central note-issuing bank until 1871, although the bank had always silver and after 1871 gold enough.
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That must be sufficient for today.
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I heartily wish you a happy new year and health first of all.
Yours truly - signed: U. v. Beckerath
____________________________________________________________________________________________
29. 12. 1948,
A B C
Date Amount of outstanding Amount for which
notes. the banker's debtors
are obliged to accept the notes at par
in their usual business.
____________________________________________________________________________________________
1. II. L 1, 000, 000 zero
from 1.II. to 1. III. 1, 000, 000 L 85, 150
1. III. 918, 183 85, 150
1.II. of next year zero zero
____________________________________________________________________________________________
D
Amount of gold or other values ready at the banker's counter to redeem presented notes. (ounces)
Date:
-------------------------------------------------------------------------------------------------------------------------------------------
The emission is based on a series of loans of the same type, each to be repaid in 12 months and for an interest of 1/3 rd % per month for the outstanding debt.
The interest tables show that for such a loan the debtor has to pay monthly 8.5150 % of the original debt.
____________________________________________________________________________________________
29.12.1948.
A B C
Date Amount of outstanding notes Amount for which the Banker's debtors and other
and of outstanding credits, persons are obliged or obliged themselves to accept
which at any time, on demand, the notes at par (provided the debtors did
may be called in, in notes. not repay their debt before the date) in their usual business.
demand, be called in, in notes.
___________________________________________________________________________________________
1. II. L 200,000 L 220, 000
2. II. 190,000 209, 000
3. II. Sunday
4. II. 180,000 198, 000
5. II. 170,000 187, 000
Etc. Etc.
9. II. 130,000 143,000
10. II. Sunday
11. II. 120,000 132,000
12. II. 110,000 121,000
13. II. 100,000 110,000
Etc. Etc.
16. II. 80, 000 88,000
Etc. Etc.
21. II. 30,000 33,000
22. II. Sunday
23. II. 20,000 22,000
24. II. 10,000 11,000
25. II. All notes returned to the banker In the amounts of this column
or bought by the banker at the market are not included those amounts, which will be voluntarily
if the debtors paid by other means accepted at par by persons, who are not obliged to accept
of payment than the banker's notes. the notes.
D E
List of the main places or persons who are obliged Remarks:
to accept the notes at par, in their usual business.
The notes in circulation after the 2. II. at an amount of
1.) The bank itself. more than L 190,000 correspond to loans contracted
2.) Ware house XYZ. after that date.
3.) Bus line x 1, y 1, z 1.
4.) Tobacco store X2, Y2, Z2.
5.) Theatre X3, Y3, Z3.
Etc.
____________________________________________________________________________________________
31. 12. 1948.
Dear Mr. Meulen,
If one considers the "modern" tendency (it is not so modern, it is some decades old or even older: perhaps you know Max Stirner's "The Unique and his Property", 1844), to give the State as many functions and properties as possible, then you swim against the stream. But, as was often observed, all social or economic developments consist in the formation and subsequent dissolution of whirls. The whirl itself may advance while a part of it seems to retire. This taken into consideration, one must say that you swim with the stream insofar as you move in the direction of the great whirl which moves now all institutions, opinions and individuals. And the direction of the great whirl - - s o great that nobody perceives its beginnings and its true dimensions - - is: replacing the State by voluntary organisations.
The State-socialists (who are always State-capitalists, whether they like to hear this or not) do themselves recognize the fact. I quoted to you an often reprinted passage from Engels' "Development of Socialism from an Utopia to a Science", which is also cited approvingly by Stalin in his remarkable book: "Questions of Leninism". (Page 723 of the German edition.)
What is the centre of the State's power? As statists themselves admit, it is the money-monopoly, more exactly expressed, the monopoly of the means of payment. In 1934 in Russia they had great "forgery" trials, where many factory managers were sentenced. What happened in that year in Russia? The State Bank, for some reason or the other, was unable to procure enough money (*) to pay the wage earners. The workers spontaneously assembled in the factory courts and demanded their pay but the managers had no means of payment and could not get any from the government bank. In this situation the managers found a natural way out of this difficulty. They ordered notes to be printed, without delay, notes that were valid in the workers' cooperative stores, and paid them their wages with these notes.
The government at once and instinctively felt itself endangered, for if this procedure would have spread, then the possibility would have been recognised to exchange goods, labour and all things without the intercession of the State bank and even to finance a resistance movement. "Principiis obsta" (Resist the beginnings!), said the government and sent the managers to the concentration camps as "forgers".
What the Russian factory managers did was using the Free Banking principle, but in an imperfect form. Indeed, the Free Banking principle is the explosive with which the modern, omnipotent, all-exploitative State c a n be blown up and one day will be blown up, with the money mechanism forming the bore-hole. (Mind you, this could be a quite peaceful "blow-up, with not a single drop of blood spilled and not a single building being destroyed. The buildings of the Central Bank, as well, can be used for something more rightful and sensible. - J.Z., 9.1.03.)
You see, dear Mr. Meulen, that you are the most dangerous revolutionist, considered from the point of view of the State. If you want this or not, under the old war cry "Britons never shall be slaves!" the workers of England will begin a revolution, one at the same time national and social. With the invincible weapon of Free Banking they will regain their liberty.
(J.Z.: Regain? Did they ever have full liberty before? And have "the workers" shown any interest in their monetary freedom options? - J.Z., 9.1.03.)
The sons will not believe that a government could prescribe their fathers what they were permitted to eat, to drink and otherwise to consume. And your name will be mentioned simply because you are now the only man in England who still fights for Free Banking.
Remember the 12 pioneers of Rochdale 101 years ago. They were poor weavers and - - as often remarked - - transformed a good part of the world's economy. If their success was not greater, it was because they did not know the principle of Free Banking. It must be your task to spread the knowledge of the principle among England's workers. Let not the year 1949 pass without having won at least 12 adherents among the working class - - men that claim as a personal right, which no majority can abridge to a minority: to take all of their own affairs into their own hands, which they are willing and believe themselves to be able to conduct, beginning with the exchange of labour-products without the interference of monopolistic banks.
In this sense: a happy new year!
Yours truly - signed: U. v. Beckerath.
____________________________________________________________________________________________
(J.Z.: Alas, when Meulen died, in 1978, his THE INDIVIDUALIST had not many more than 100 subscribers and I doubt that a single blue collar worker was among them. Even Meulen himself was not prepared to quite freely discuss all monetary freedom options that deviated from his own "free banking" project. He never explained why the remaining monetary freedom option (which he claimed did exist), for the issue of notes not promising redemption in gold or English government pounds, were not taken up by any of the money reformers in England, least of all by himself and his own little group, the Personal Rights Association. The only English "goods warrant", that I ever encountered, was a canteen coupon for some food at the airport, when my flight was diverted to London due to fog in Frankfurt. English trade union workers certainly showed no interest in alternative means of payment for themselves and for unemployed workers and, to my knowledge, they still don't. Even the somewhat better educated civil servants have, apparently, never demanded to be paid in a currency that is more sound, and sufficiently supplied at the same time, than is and was the governmental paper pound. - The publication of small and short newsletters - The Individualist had only about 60 pages p.a., in 6 issues - seems to indicate that even among their subscribers there are not enough people who have the interest, time and energy to read and write more, particularly when these newsletters have become very personalised ones, like Henry Meulen's little freedom journal was. Just 12 pages every 2 months! Their readers become then largely a small in-group of largely closed minds for everything outside their "party-line" and the programme of the journals tends to become just that of one man, the editor. An open-input rule should be applied, as far as possible. Few editors manage to do that. - With alternative media one can adopt such a rule to an almost unlimited extent, especially when it comes to CD-ROMs and DVDs reproducing many long texts. - J.Z., 9.1.03 & 22.5.03.)
(*) (J.Z.: After the fall of the Soviet regime and while its communist central banking and all too much of its centrally misdirected "planned" economy was continued, and even during a rapid paper money inflation, government employees were often unpaid for weeks and sometimes for months!
On a smaller scale, we have governmental payment difficulties even in government finance in "democracies" like Australia. The Australian Defence Minister, whose bureaucracy had greatly underestimated some defence costs, could not even resort to a supposed cash surplus account of 1 billion, intended for emergency spending, because even this supposedly "ready cash" was, as he said, tied up in red tape! (According to a recent newspaper report.) Via taxation and other charges governments often withdraw much of their monopoly money from circulation and then there are so many and long delays through their bureaucracy, before this money is spent again, that quite severe deflationary effects, with mass unemployment, can appear. According to research of the circle around Ulrich von Beckerath, on the already all too short supply of government cash, just after the Great German Inflation, which ended in 1923, up to one quarter of the supposedly "circulating" new notes were held up in government offices, on their bank accounts, between their collection as taxes and their spending for various government programmes. That kind of government created bottleneck for an essential commodity, namely cash exchange media, has been all too little studied. It is simply taken for granted that taxation would not even temporarily reduce the note circulation. Indeed, governments are "great" spenders and often even spend more than they rob in taxes. But often they do not spend as fast as they take and under a money-issue monopoly that can create great difficulties. Then and thus the make even the raising of further taxes difficult - because there are not enough means of exchange to pay them with. What results may then be comparable to the attempt of an Inquisitor to extract a confession from a dumb and deaf victim. - J.Z., 9.1.03.)
____________________________________________________________________________________________
2. I. 1949. Your letter of 28th of Dec., received the 30th of Dec. (!!!!!!)
Dear Mr. Meulen,
your letter is most interesting. You knew Kitson personally!!
That Kitson represented you as a bad Englishman was the worst he did. If your ideas, for which you took so much trouble, would be realized, in every part of the world, there would arise a strong movement among the people to become a member of the British Commonwealth. Opposing governments in India, in Burma, in China and other countries would be swept away. People would say: A nation, which is so well organised, creates labour for every individual, and is ready to communicate its methods to everybody who likes to learn from them, protects self-government in every country and gives to everybody who lives under its flag the possibility to die as a rich man, such a nation we would like to join! But the methods proposed by Kitson are now - - at least concerning the State-monopoly of money - - realized and the indirect effect is or contributed to the present state: What more than 3 centuries built up is lost in less than 3 decades - - India (practically) lost, Burma lost, etc., etc. Kitson is excused by his ignorance on the principles about which he would instruct others. But that is no glorious exculpation.
When I was about 15 years, I spoke to an old man about the war of 1870/71. I was a pro-Prussian - - of course -- for we are all born as nationalists and fascists. Then the man asked me simply: And what would your point of view be, if by chance you would have been born in Paris??? That puzzled me and at last I understood him.
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Benjamin Tucker's " Instead of a book. After the repeal of the socialist-laws in 1889 there was founded in Berlin a little group of Individualist Anarchists - - peaceful reformers such as Tucker was, whose aim was merely to confine the State's activities as far as technically possible. (Here the Tucker-Group was in the same line as Herbert Spencer, Kant, 100 other excellent thinkers and the old and so often misunderstood Manchester School.) I got some pamphlets edited by the group and read also - - with all enthusiasm of that age - - Max Stirner's "Der Einzige und sein Eigentum". Since that time I tried to get "Instead of a book" but I never got it until some time before the 22nd of November 1943, when a great air-fleet burnt my library, my house, some thousands of other houses, killed many women and children, but spared the high furnaces on its way from England to Berlin. It was convinced to have contributed something to its own glory and the end of the war. Among the burnt books was that of Tucker, and I had not yet found the time to read it. Now I am too old and will never rend it.
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In the 90's there appeared in New York a periodical "Sound Currency", excellently edited and in its content near to the ideas of the Four Bills. One of the best articles was that of John DeWitt Warner: The "Currency Famine of 1893", published in 1895 and reprinted 1896. The author explained the goodness and economic possibility of Free Banking by the example of the "Clearing-house certificates" very generally used in the weeks of the currency famine. I think at London this magazine is still obtainable. If you will read it, you will be very pleased.
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I will take it as a good omen that you entered the new year in relatively good health.
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I do hope to be able to continue next Sunday. Please do not ascribe the voluminous letters of these days to other reasons than the fertility of the thoughts in your letters. That my nature does not tend to loquacity in writing I have proved - - not to my honour, indeed - - in the last year, when my expense for ink ribbons was smaller than in any year before.
---------------
Very truly yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
2. I. 1949.
Dear Mr. Meulen,
the importance of the subject may justify me if I write you so much about it. The monopoly of the means of payment is, probably, besides atomic bombs, at the moment the most serious menace to the world's culture - - not only the Western world's, as the events in the Far East teach. The history of the world is not, as Marx erroneously believed, a history of class-wars, it is essentially the history of the means of payment.
Gibbon - - the splendid and unique Gibbon - - was quite right when he stated: If the monks, who brought silk from China to the emperor Justinian, would have brought from there paper and the knowledge to manufacture it, and if Justinian would have been intelligent enough to use it for paper money, then the history of the world would have been very different from what it became and a better one. (Among the 3,000 books of my library were also those of Gibbon.)
If the danger through the monopoly of the means of payment is so large, as I see it and as you see it, then Free Banking is the most important thing in the world. Suppose, any enlightened government grants it to its subjects, and the subjects do not use it in the technically and economically right way, so that the notes get a discount immediately after their being issued and then are declined by the people, everybody will ascribe the failure not to the special application of the Free Banking principle but to the principle itself, and it may be, that the principle never has a further chance, because everybody believes it refuted by experience.
(J.Z.: Compare how the results of the lack of sufficient freedom was often ascribed "laissez-faire", or to the free market or to competition, or to free enterprise capitalism, while neither were as yet sufficiently realized and all the remaining man-made evils were really due to the remaining monopolies, other interventionism and ignorance and prejudices. - J.Z., 9.1.03.)
The greatest danger to Free Banking is the seeming possibility to create by it an immediate possibility of long term credit. The opinion that the Free Banking principle may be used for this purpose is widespread. Permit me to demonstrate the right principle of Free Banking by some propositions (?suppositions"? contrasts? - Here the text is an illegible: o--ositions. - J.Z.)
Under the heading I, I will lay out the application of the principle as it would be, if Bill No. IV of the Four Bills would be enacted by legislation. Under II, I will lay out the application, if the proposal: "raise money by circulation" is applied.
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I.) Free Banking creates means of payment by subdividing money-valued, ready claims originating from selling goods or labour. The claims, running to great sums, are converted into notes by the banker.
II.) Free Banking creates money by converting the value of the claims or goods, due at once or later, into money.
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I.) What keeps the notes in circulation is the certainty for every note holder
(J.Z.:B. usually says: "note bearer" and I replaced it with "note holder". His term may not be as common but is insofar perhaps more correct, as the note bearer seems to be on the move and seems to already offer his notes in exchange. - J.Z., 9.1.03.)
that he may convert the notes at any time into objects of daily want, say victuals, barber services and similar ones.
II.) What keeps the notes in circulation is the trust of the public in the honesty of the banker, the word honesty taken in its usual, moral sense.
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I.) It is an advantage, especially for the banker, if his notes return to him as quickly as possible.
II.) It is an advantage if the issued notes are in circulation as long as possible.
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I.) Gold has nothing to do with the business of Free Banking, excepting the case of the banker's debtor having gold coins and being willing to pay with them. But the banker would in this case have the right to claim a little premium. (10/00 or so.) The banker should not be entitled to demand gold coins. (Nor should the creditor be entitled to demand gold coins from the banker. - J.Z., 9.1.03.)
II.) A stock of gold is a useful help in the business of Free Banking.
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I.) The asset of a long-term credit is always, in the last resort, a house, a great machine, a ship or a similar good, for normal buyers not payable in a lump sum. The goods produced by long-term credit are - - and that is very important - - produced by workers - - the word taken in a wide sense, including managers of factories - - who, on their part, consume goods as victuals, clothing, etc., that is goods in daily demand. Insofar the use of long-term credit for the production of goods, of the above-mentioned kind, is an exchange of goods in daily demand against houses, ships, machines, etc. Free Banking takes that circumstance into consideration.
II. The note-issuing banker has nothing to do with such considerations. Expressed in ideas of his business: The intercalating of short-term credit between the financing of the mentioned goods and the issuing of the notes is quite out of the banker's considerations.
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I. If the house, the ship, the machine etc. is manufactured and the manufacturing well financed, there are bondholders, who are now the creditors of the house owner, the ship owner, the machine owner, etc. The banker has nothing more to do neither with the owners nor with the bondholders. The notes, by which he financed the production have all returned to the banker.
II. All notes used for financing the houses etc. are in circulation and return to the banker to the degree in which the owners of the houses etc. pay their debt to the banker in notes.
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I) If the owner of the house will repay to the creditors (bond-holders) the interest and the instalments, it may well be that he applies for financial help to the banker. If he does, the process of financing is accomplished a second time in (reverse?) direction - - of course for the banker's advantage.
II. That is an idea quite outside of the usual business ideas.
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I.) The Free Banking principle may easily be used for the external trade. The importer may issue, with the help of the banker, certificates not convertible into cash but only to be accepted as cash in the debtor's usual business. The denomination may be - say - 100 dollars or more per certificate.
Say, into England would be imported goods from abroad for an amount of 1,000 millions of dollars within half a year. All Gazette-economists faint and think England's industry will be ruined. Then they begin to meditate: By this principle of payment every dollar of imported goods must create corresponding labour for English workers (the word taken in its widest sense) and the amount of currency in England remains quite unchanged.
II.) Free Banking has nothing to do with external trade.
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So much today. In a few minutes the current will be switched off.
Yours truly - signed: U. v. Beckerath.
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2. I. 1949
Dear Mr. Meulen,
Schopenhauer in his dissertation "Ueber Geistersehn und was damit zusammenhaengt" and also in his book "Der Wille in der Natur", explained, that many of the "magic" apparitions, such as spectre apparitions, do not prove an individual immortality. (His views were somewhat those of the modern School, which supposes the existence of a "group soul", but Schopenhauer's views, founded on Kant, are much more superior.)
The thing is important enough, since the ghost apparitions in the "séances" of the spiritualists seem to reveal a world no less terrible than our present world, but ridiculous in all its dreadfulness. Schopenhauer demonstrates that the apparitions are to be interpreted in a manner quite different from all interpretations given before him and, above all, different from the seeming immediately following from the observations.
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The most astonishing phenomenon reported from the séances is that which happened in the 70's of the nineteenth century in experiments of Professor Zoellner at Leipzig with the medium Slade. Zoellner summoned the "spirits" to change the polarisation angle and the polarisation direction of a solution of grape-sugar, what the did. Zoellner published his experiments in a volume "Transcendental-Physik" (a pearl of my library, burnt). The experiments were watched by some of Germany's first scientists, such as Wilhelm Weber (the man who 80 years [ or so]) ago firstly calculated atomic energies and said: in a copper penny there is more energy than would be used in transporting a great steamer from Hamburg to New York and back), Scheibner - - an excellent physician and mathematician, Fechner, the founder of the modern Kollektiv-Masslehre", that is of modern Statistics.
If it is possible to change the "atomic" structure of matter by intervention of that unknown force still now called "spirits", then the possibility to bring atomic bombs to explosion before they are transported to the spot where the transporters will let them explode, is given. If Zoellner still lived, he would simply say: Well, I will ask my "spirits"!
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The dissertation "Ueber Geistersehen etc." in the work "Parerga and Paralipomena" you will have read in less than two hours.
I think the German text will be intelligible for you.
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These few words in haste.
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Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 4.1.1949.
Dear Mr. Meulen,
in countries like England or Germany, in times of a stable currency, the demand for opportunities to invest is always greater than the demand of trustworthy debtors for new credits. Look at the English or the American Building Society movement. Especially in England, not in any year were the Building Societies in difficulties getting new money. But they had often difficulties in investing money. About 20 years ago, some of the greatest Building Societies found it necessary to restrain the influx of new money. (The Building Societies Gazette, Cursitor (Oursitor? - J.Z.) Street, will give you all the information. You can also get information from the Abbey Road Building Society under the brilliant management of Sir Harold Bellmann [I do hope he is still alive] - - but I forgot its address.)
The interest rate, under such circumstances, is practically equal to the costs of administration + the risk premium, that is about 2 1/2 p.a., in Germany a little more.
If one acknowledged these facts then one will agree that the task of a banker, the word taken in the sense of 1843, will be less to create capital for trustworthy debtors - - say by note-issuing - - but to intermediate between debtor and investor. This intermediation also requires note-issues - - a fact, although it seems that even now it is seldom noticed, although it was certainly used already, for practical financing during the times of the old Scottish banking.
The intermediation consists in subdividing the investors' capital into money-like pieces and to hand these to the debtor in the form of these pieces, that is in notes. The intermediation requires a very short time, so that the banker's capacity for new note-issues is restored at short intervals.
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According to the old "raise money by circulation" theory, the banker must not look out for investors. Investors are superfluous for long-term credit. The issued notes themselves are a good "Ersatz" for the investor, and the banker's capacity to issue notes is the inexhaustible source of long-term credit, whose ultimate foundation is the trust of the note-bearer in the banker's honesty, the word taken in the usual moral sense.
But the following consideration show that in this idea something must be wrong.
Everybody will admit that there is some limit for the quantity of currency in a community. For England the limit may be L or L 10, 000 millions or more, some limit exists, provided a pound represents a tolerably stable quantity of goods or labour for the time under consideration.
NOW - - after the limit is reached, obviously no further issuing of notes is possible, except by proclaiming the notes a legal tender. (Cours forcé). Here this case shall not be taken into consideration. If no further issuing of notes is possible, then the former source of long-term credit does not longer exist. Is long-term credit then impossible? Certainly not, but then it is only possible by any other system, e.g. by the system of the Four Bills.
And now the question arises: Why not at once begin by this system without trying to supply long-term credit simply by issuing notes??????
Yours truly - signed: U. v. Beckerath.
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U. v. Beckerath, … 14. I. 1949. Your letter of 9. I., post stamped 10. I., received yesterday.
Dear Mr. Meulen,
In great haste I pick some points from your extremely interesting letter.
You are right: "The history of banking shows that the function of gold in exchange has been to support or supply the defect of mutual trust". But
I.) Kant teaches, that the principles of that which should be done cannot be taken of that which has been done. Reason is (says Kant - - and I agree with him - -) the source of the principles which should regulate the action of man.
II.) The blocked brains who tried to supply trust by gold overlooked
a.) that trust cannot be replaced by gold. If people do not trust a banker, the banker will not do business, even
if he possessed Solomon's treasures.
b) that banking business requires much more than trust (and gold), trust being one of the many elements, such
as ink, paper, tables and rooms to treat the customers' applications.
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You are also right:
"As trust develops, less and less gold is used." But is there a causal connection between the two facts:
a.) gold is less and less used, and
b.) trust develops - ??????
I think there were bankers (note-issuing bankers) did business, the trust of the banker's customers was as good as it could be and not capable of a further development. What could be developed was the number of the banker's customers, and this number was always as great as it could be under the given political, economic and legal conditions. But it is rightful to say: trust increases, if only the number of the trusting men increases. Nevertheless, the two cases must be distinguished: "the degree of trust increases" and "the number of the trusting people increases".
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You are very right when you said: "all schemes to compel trust have foundered on the rock of primitive human distrust."
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You say: "… the old Scottish banks made their notes redeemable in gold". Hm, hm - - did they not make the notes redeemable in silver ??????? Or at the, option of the banker in gold or silver???????
There is a difference. People prefer paper to silver for amounts of about more than five old shillings. But they prefer paper to gold only for amounts of about more than five old pounds. The factor is an "irrational" one, but utilised by old banking. (I know it from Germany's history of banking. Before 1871 Germany possessed about 35 note issuing banks, more than old Scotland had of Banking-Corporations. But - - it is true - - the note-issuing private banker was unknown in Germany.)
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You say: "I think that new banks which offer to redeem their notes either in gold (at the market price) or in the notes of well established banks, will find it easier to get started than banks whose notes can be redeemed only in the goods of people who have published their willingness to accept the new notes."
I.) I think you will not prohibit banks on the basis proposed in my letters; that is all I demand.
II.) As a counter-gift I will not prohibit your basis, but I must demand full publicity - - on which latter point we do agree, I think.
III.) You - - I hope - - will not prohibit people to fix and to measure prices, wages, rents etc. in gold coins. I mean here the system used not only in Germany at the time of the Great Inflation, but also in other countries, say Austria, Poland, Italy, etc. It was even - - although only in a restricted measure - - used in England at the time of the bank restriction, before Parliament prohibited it. ("Mit dem Belagerungszustand kann jeder Esel regieren" [With a state of siege every jackass can govern! - J.Z.], said the very clever and experienced Metternich.)
The system consisted in fixing a "floor price" (Grundpreis) in gold coins and paying the price in so much paper money as was indicated by the price of paper money at the Exchange. Example: A book was priced: 10 gold-marks. At that day, when a man bought the book, the price of a ten gold-mark piece was 1,000 paper marks. Then the man paid to the bookseller 10 000 paper marks. Many Englishmen who visited Germany, Austria or Poland etc., after the first world war, will remember this system - - simple and effective, until the moment came when the time difference of a few hours caused variations in the price of gold coins that could not be neglected.
Now, say, a note is issued with the inscription "10 gold-Marks" and then this note is accented in all stores which operate on the described system for the value of 10 gold-Marks, that is, the purchasing power of the note is so constant as is the purchasing power of a 10 Marks gold coin. In the "Four Bills" such notes or typified cheques are provided.
In your system the inscription of the notes obviously is: 10 paper Marks. This requires a definition of the notion "paper mark" on the note. The notion could be defined as: "Paper marks of the value of the paper marks issued by the central bank of the country" or "paper mark of the bank X." And now we come to the central point.
If the people do not use the permission to fix the prices, wages, rents, etc. in gold coins, but fixes them in the same paper unit as your notes are fixed, then perhaps your system may operate for some time. If prices rise, the people in this case do not ascribe to the rise to an inflation coming from the money side (say, an abusive issue of the notes by the central bank, in whose money units the private notes are here supposed to be valued), but to an influence from the side of the economy or any other side.
The workers will say: The capitalists have once more made too high profits, and therefore the prices have risen. The journals and the "experts" will say: "The wages are too high". The astrologers will find the reason in some star constellation. (They always find them after the events happened.) And the churches will assert a new lowering of the people's morale.
In this case the price of gold coins or bullion at the Exchange is not observed by average people. Therefore you may offer to such people, when you redeem notes, the price of gold coins at the exchange.
(I do not find B.'s remarks clear enough here. Precisely because average people will not have observed the fall of paper marks or pounds at the Exchange, against gold coins or bullion, they will be shocked when, upon presenting their paper marks or pounds for redemption into gold, they will have to pay much more in paper money for gold than they had expected. They will feel cheated and protest, for the old relationship between not yet or not as much depreciated paper money and gold weight units will not be altogether forgotten. - J.Z., 10.1.03.)
Things are very different if the notes are valued in paper units - - say notes of the central bank - - and the prices in the stores on a gold basis. A fortiori things are very different if, at the same time a note-issuing bank does business whose notes are issued as gold-mark-notes. Then the people - - and also average people - - compares.
As old Buffon says (His works are burnt - - 9 volumes of the splendid Cuvier edition and 9 volumes of Schaltenbrand's excellent translation - - both more than 100 years old - - eheu - - my nice library - - but the nazis did no better with your library than did the English air fleet at the 23rd of Nov. 1943 with mine.)
"To know is to compare."
Say, prices, expressed in paper money double within 24 hours, which they did at the 19th of October in Berlin - - for bread they even trebled - - and the price, expressed in gold, remains unchanged. What do you think about what the people would say???????
And how they will talk of the bank whose notes were gold notes in the sense previously described?????
People will speak thus:
The bank whose notes are on a paper basis offers us as redemption half of the quantity of gold that it offered yesterday.
And if the prices rise, as they rose 1923 in Germany or 1948 in China, the bank will redeem its notes with a quantity of gold less than the ring at the finger of its banker. We go to the bank issuing gold notes.
In all your explanation you suppose:
a.) Notes on a paper basis, so that the meaning of the world Pound or Mark or Dollar etc., is fixed either by the
banker himself or by another banker, say the manager of the central bank.
b.) Price expressed in the same paper unit and not in gold or silver (or rye as they were expressed 1922 and 1923
in some places of Pommerania).
Do you really believe that people will not express prices, wages etc. in gold, if they are permitted to do so??? Experience shows that in every part of the world the people express prices in gold or silver if they are permitted to do so.
So much for today. I hope to write next Sunday some more words. Cold fingers, lack of time and - - a greater evil than all others - - lack of light prevented me from writing more to you and to reply to your letter six weeks ago.
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Very truly yours - signed: U. v. Beckerath.
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(B really tried to get some more sense into the head of Henry Meulen, on monetary freedom matters. But, did he succeed, in years, if not decades of seriously and extensively trying? Not that I am aware of. Temporarily, H. Meulen sometimes retreated, e.g., in his discussion with B. on "overpopulation" - but some time later he again fell back into the long refuted prejudices on the subject. Fixed ideas can be found even among the best kinds of people. - J.Z., 10.1.2003.)
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U. von Beckerath, … 17.I. 1949.
Dear Mr. Meulen,
industrial credit for small and medium sized firms is always scarce for European countries, Belgium perhaps excepted. Even in times of abundance of capital, the artisans and small shops (have) (originally B. wrote "find". Then he crossed this out and substituted, in handwriting, a short word that I cannot read: "met"?. - J.Z.) difficulties in finding credit. One of the reasons is, of course, that the investor cannot give credit in the form that is to him most convenient, that is in the form of buying bonds.
In Germany and, probably, also in England it was sometimes proposed to establish associations of small industrial firms. Such associations could create bonds. Scratchley, an excellent mathematician and economist, the man who gave the Building Society movement a scientific basis, published about 1870 a collection of pamphlets, one of which was the elaboration of a plan to create "local enterprise associations" on the model of the Building Societies.
(I owned the book - - but it is burned.)
For the sums won by selling the bonds of the associations, credit could be granted. The duration of the credit would depend on the repayment date of the bonds. An average duration of about 5 years seems to be the most suitable. (Credits to be repayable in the average within 60 months by equal instalments.)
It would be very important to get the recognition of such bonds as trustee securities in the sense of the Trustee Security Act. If this acknowledgement is attained, then savings banks, insurance companies, superannuation funds and building societies (which often do not find good investments), would have the opportunity to buy these bonds.
Scratchley advised -- and the American experiences with building and loan associations give confirm him - - to confine the activity of a local enterprise association to a relatively small district, say a little town. The administration cost of such an association - - whose debtors can be reached with a bus or a streetcar - are always small, seldom exceeding more than 1 % p.a. of the outstanding capital.
In England and in all countries a law is missing, which declares every investment, that is guaranteed by a credit insurance, as a trustee security in the sense of the Trustee Security Act. If such a law existed, it would be sufficient to insure the bonds or, at least, a part of them, by a credit insurance, to endow the insured bonds with the quality of a trustee security.
In a book, published 1929 ("Die Reform der Muendelsicherheitsbestimmungen …" - - "The Reform of Trustee Security Legislation") Prof. Dr. Rittershausen demanded what I just pointed out. If a member of parliament would carry through such a bill as here sketched, he would be a very great benefactor of his country.
(Politicians are not in business to benefit "their" countries but, rather, themselves. Obviously, they could not gain many votes with such a bill. - J.Z., 10.1.03.)
(For months I have had an article, 9/10th written, in my drawer, which I cannot finish for want of heat and light. In this article - - which wants only the "finishing touch" - - I demand the "Muendelsicherheit" for every credit-insured investment. I think it possible that all credits given to the Industry of Berlin could become credit-insured and also all credits given by Berlin's industry to customers abroad. It would certainly facilitate the supply of Berlin's industry with capital.)
Very truly Yours - signed: U. v. Beckerath.
(That article might still be unfinished, unpublished and buried in his papers. The most sensible proposals still do not have a regular platform and are not systematically archived and made accessible upon demand. - J.Z., 10.1.03.)
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U. v. Beckerath, … 17. I. 1949.
Dear Mr. Meulen,
I thank you very much for the very interesting letters of Victor Gollancz and of Ian H. Christie to the editor of The Times. Christie and the numerous people who share his opinions do not take into consideration a most important circumstance which was already pointed out by Gibbon. Gibbon says, that in a commonwealth with good roads, so that a great mass or troops can easily be transported from one frontier to the other, an army of the size of 1/100 of the population is sufficient to keep the population in a state of absolute subjection, provided the population is without weapons and military organisation. Gibbon is right. At the time of the Roman Empire the number of the soldiers was about 400,000. The number of the inhabitants was estimated between 40 millions (the most probably number) and 60 millions. In the 18th century the relation was a little changed. The army comprised about 4 % in France at the time of Louis XIV and about 3 % in Prussia. In the 19th century the old relation of 1 % was restored in most countries.
The man, or the group of men, who controls the army, controls the people. If the ruler thinks it fit to compel the people into a certain religion or some public opinion, he will succeed if he uses merely the general political dexterity of rulers. Therefore, Adam Smith says - - starting from similar considerations - - that a people will not conserve its political liberty if it does not possess a militia. As long as the Americans have their militia (now more than 10 million of men, I think), they will conserve their political liberty.
(J.Z.: Alas, it has long been under State control and legislative intervention and juridical interpretations of the constitution and of the Bill of Rights have "gone wild" and wrongfully restricted every basic liberty - while most Americans remain uninterested in individual rights and in better and more complete drafts of them than can be found in the Bill of Rights Amendments to the Constitution of the US. - J.Z., 10.1.03.)
It is the habit of more than 99 % of all men to judge peoples, and everyone who belongs to a people, according to the principle of collective responsibility. This principle says:
1.) Every man is responsible for that which his government does or neglects;
2.) Every man is also responsible for acts or neglects of his countrymen.
To judge in this way is an intellectual remainder from the Stone Age. Even in the Bible the principle of collective responsibility is used as self-evident. How often punishes the God of the Jews the whole people for acts of its king (e.g., a census) or of a citizen (a theft, a marriage with a non-Jewish wife)? In the New Testament this is the same. It is reported that Christ threatens the towns, which do not welcome his disciples with the fate of Sodom and Gomorrah, little children included and those, who had no opportunity to hear the disciples. (I am convinced that the words of Christ are fully misunderstood - but the churches accept and endorse the text of the evangel.
In discussions between Germans and others the principle of collective responsibility is always the basis. The fact, that neither the people as a whole nor the single citizen has any possibility to act on the government is always overlooked and that on both sides.
"The Germans are aggressive neighbours!
Such nonsense. The "Germans do like - - as do other men - - to sit peacefully at home, eat and drink as plentifully as possible, play cards and do not care for affairs not in their immediate surroundings and requiring meditation. But if anyone were to say:
A German government with absolute power over the 70 millions inhabitants will always be a danger for Germany's neighbours, for it will - - as every government does - - begin a war, if it does not know how to settle internal difficulties, the man would be in the right. But he can say the same about France, if he is an Englishman, of England, if he is no Englishman and of every other State, if he is not its subject.
The same kind of wrong is committed by the Germans, who judge a single Frenchman according to the now ordered destruction of the watch factories in the French zone and then a single Russian for the present politics of the Soviet Government. (The Germans do that. I must admit it.) The single Frenchman has no more influence on his government than a German had and has on the German governments.
The power of the principle of collective responsibility (which Dupiat represents as that part of social mentality which caused more disaster than any other) is now to be seen in an interesting case. In Berlin the inhabitants of the two districts begin to consider each other as two nations. If I get more time, I will write you some details.
All men in the world, Germans and Negroes, Englishmen and Frenchmen, Indians and Eskimos, have the common interest to create a state of government in which no government is able to begin a war and mobilise its subjects for purposes that, in every war are contrary to the true interests of the peoples and of 99% of the single subjects.
Every war is a civil war!
Experience has already shown that the creation of the UN is not sufficient. Herbert Spencer, in his Social Statics, chapter 19 ("The right to ignore the State") and long before him Fichte, in his "Considerations on the French Revolution", proposed independent associations which would have about the rights of the old knightly orders, e.g., to remain neutral in the case of a war. There is much to be said about this.
Very truly yours - signed: U. v. Beckerath.
As long as the true solution of the government problem is not yet found or recognized, I think it best for the case of England & Germany that those German territories, which by plebiscite decide to become a part of the British Commonwealth, on a Dominion Status, should be admitted.
May every factory, suspected of becoming an ammunition factory in times of war, be occupied by English soldiers - - that does no harm to the German economy, but the Dominion status should, on the other hand, be really and honestly established. I confess that in the year 1945 I sent an application to the British Government to get a permit for the beginning of a movement for the organisation of Germany as a member of British Dominions. You will believe me without proof that I never got a reply. And yet I know that, especially in the district of Brunswick, for many decades, people think that to be a good solution. Now I am too old to begin any activity.
Very truly Yours - signed: U. v. Beckerath.
(Alas, I have never seen a copy of that proposal, either. Another of his and for me and others still hidden proposals: After WW I he had proposed, and this was then published in a Braunschweig paper, a subdivision of Germany into many and largely independent cantons, like Switzerland. I suppose his proposal contained other interesting features. Another proposal, to combine West and East Berlin with the surrounding province of Mark Brandenburg, declare it to be a neutral country and to introduce economic freedom in it, was lent to one of his contacts and never returned. Nor did I ever see a copy of it. B. had almost never access to the supposedly free press & other media of the German empire, the Weimar Republic, of West Berlin or West Germany. What he did manage to get published, occasionally, appeared usually only in specialist and more or less obscure periodicals, like newsletters of a bank, of insurance companies, or the Swiss Annals of Prof. Milhaud, and the like, including, all too belatedly and still quite incompletely, my own PEACE PLANS series. At least, during his lifetime, I still managed to get his three monetary freedom books reproduced in a primitive and duplicated edition, in PEACE PLANS 9-11, which have recently also been digitised and are available, free of charge, upon request, by e-mail in RTF. - And yet he was, probably, the most prolific and profound thinker, innovator, reformer and revolutionary of the 20th century! Indeed, I for one place him above Fichte, W. v. Humboldt, Proudhon, Stirner, Tucker, Spooner, Mackay, Meulen, Mises, Hayek, Rothbard, Harper, Read, LeFevre and many others of the great libertarians. He is still, for instance, the foremost of the monetary freedom thinkers. How many centuries will have to pass before his contributions will be recognized? - To be appreciated only by a few indicates his value. (Laotse) - J.Z., 10.1.03.)
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18. I. 1949.
Dear Mr. Meulen,
we are now entered into a new state of political science.
It was one of the principles of the old political science that the right of nations or States must be judged according to the principles by which the right of individuals is judged. E.g.: The principle of non-intervention was generally recognized. But already Fichte said, that if on any point of the Earth as despotic power is established, it is not only the right but even the moral duty of every man, ruler and subject, to do what he can to restore the liberty in the country concerned.
Applied to Germany: It was the duty of the rulers at the time of January 1933 to intervene in Germany in that month. It would have been a military walk and certainly would not have cost more than 10,000 men. That would have been especially the case if the Allied would have had at hand a government-in-exile and would have summoned the Germans to turn to their "legal government, just like the old Romans did in similar cases. (See: Montesquieu: "Sur la grandeur des Romains."!
But, what is Liberty? David Hume, in his dissertation "Von buergerlicher Freiheit" (On Civil Liberty? I cite from my German translation, published in 1800 at Koenigsberg, by an anonymous author.) explains, that even in the absolute kingdoms of his time, as Spain and France, there was much more liberty than in many republics of antiquity. At present people discuss whether Franco's Spain offers enough political and liberty to her citizens. The principles to judge it by are still to be stated.
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Another principle of very great practical importance. "National liberty". Ireland and India demanded it. (To tell the truth: About 1 % of the population demanded it, in India much less, the rest of the population being disinterested and only interested in the question how are we governed, and not: who governs.)
England's public opinion was: It would be right to grant to Ireland and India "political freedom", and, accordingly, England retired her troops. Effect: In India the most bloody civil war, so that everybody must acknowledge: The peoples of India are not able to govern themselves and are unable to keep the peace, if not a stronger than themselves compels them. Who wanted a further proof gets it now by the events in Durban, where not only the Indians but also the Negroes demonstrate that they are unable to keep the peace and both want a master.
If a man of average strength sees on the street two fellows scuffling, he will intervene and protect the two by seemingly reducing their "liberty". Everyone admits that it is his duty to do so. It is the same with groups of men. If two groups, may they be a nation or a sect or a class,
23.I.1949.
begin scuffling, it is the moral duty for every man to restore the peace, who has power enough, to do so. It is even his moral duty to keep the two parties under his power until he believes that a sufficient probably exists for this peace to be continued. If the two parties appeal to a pretended right of scuffling, he will all the more hesitate to dismiss them from his power. Obviously, they do not perceive the natural limits of their rights, be it because of innate stupidity or for other reasons.
When I read that the English army was to leave India, I (and every man superficially acquainted with India's history) did not doubt that a terrible civil war in India must be the consequence. In many towns the civil war began some hours after the English troops had departed.
The number of victims is conservatively estimated at 15 millions and many thousands of destroyed houses. That could be foreseen and, therefore, I think the dismissing of India from the power of the English government was morally not justified and was even a violation of the real rights of the inhabitants of India. (I do not speak of an Indian nation, a thing, which never existed, does not exist and will probably not yet exist even in the year 2049.) To grant the inhabitants of India (as a whole) the right of government is the same as granting to children the right to play with knives and to use them against one another.
Is it another thing with China? The number of the victims of the civil war since 1912 is certainly not less than 50 millions, including the men drowned in the Yang Tse Kiang and other rivers after the destruction of the dikes or merely by neglecting them.
It is my opinion that a league, union or however one may call it, should be founded - - openly if possible, secretly if necessary - - to study the possibility of restoring the "Pax Britannica" in India and to extend it to other countries. As the example of India proves, the Pax Britannica did not exclude natives, capable of governing others, from the administration of the country and even to be put at the top of provinces, greater than celebrated kingdoms in old times.
Of course, a treatment of natives like that of Indians and Negroes in South Africa does not belong to the maintenance of the Pax Britannica. Let me remind you of the treatment of the natives in the Portuguese colonies and even in French colonies such as Anam, Pondichery and others. In these colonies never as serious movement arose, demanding: "Europeans, leave the country!" I know how badly the Portuguese colonies are administered. - And yet, the inhabitants are content and the intelligent among them know well that a home rule would mean a very serious aggravation. A trick of the Portuguese policy is to favour marriages between Europeans and natives. They know by an experience of centuries that half-breeds, if treated as of equal birth, are the best and most reliable supports of the European administration.
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The people of India, China, etc. must be educated. Of course it must! I do not know of a better education than that by Free banking! If Free Banking were introduced in India, the English there would play - - so to speak - the role of the Normans among the Anglo-Saxons. After a short time every essential difference between the two peoples would have disappeared. Men who have no right to procure for themselves, by their own activity, the needed means of payment, will remain slaves, but men who obtained that right by a fight or even a revolution (and, I am afraid, otherwise Free Banking will not be introduced in India; the resistances are there - - I estimate - - much greater than they are even in England now), will by and by gain all other liberties, personal and economic (the only really important ones) that free men need.
Very truly Yours - signed: U. v. Beckerath.
(I do not know why he did not apply his panarchistic ideas to India and China. Obviously, the old territorial system was and still is flawed for both, as for all other countries and under it a superficial internal peace could be kept only by brute force. - J.Z., 10.1.03.)
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25. I. 1949.
Dear Mr. Meulen,
in the "Kurier" of today I read of an "Amok-Laeufer" at Tischenreuth, a little town in Bavaria. (The English word for "Amok-Laeufer" is perhaps a compound of "amuck" but I cannot find it in my dictionaries.)
In Dutch-India cases of "Amok-Laufen" are frequent and occur not seldom among the more peaceful Chinese race. (More frequently men, who feel themselves overwhelmed by a suffered injustice, "yellow the street", as I read in a description, also women do so in the same case. The progress is obvious. A man or a woman who "yellows the street", appeals to his or her fellow - men. The "Amok-Laeufer" kills them, because - - and here lies the rub - - he applies unconsciously the principle of collective responsibility. So deep is that principle rooted in the human mind!
(By now we have had a number of amuck mass murders in Australia, the USA and England as well, usually committed with firearms. Press reports usually say little about the repression felt by these victimisers, which finally induced them to try to "get even" in this atrocious way, blaming others, quite indiscriminately, for whatever wrong they imagined had been done to themselves or which they had really experienced. - Thus I doubt that it is a matter of racial differences, as B. supposes in the following lines. - J.Z., 10.1.03.)
In Bavaria remained much Mongolian blood from the invasions of the Huns, the Avars and perhaps others, as the Hungarians. The black Mongolian hair and the Mongolian eyes are still there to be found. Perhaps the "Amok-Laeufer" of Rischenreuth was a descendant of some old Mongol.
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Some decades ago, the English cooperative union sent missionaries to India to spread there the idea of cooperation - consumer cooperatives, mutual savings banks, and others. Never were missionaries sent out with a nobler commission. The success was very good. Today many thousands of Indians, who before were little more than slaves of the zemindars are now in a state of relative independence, so far a such a state is possible in India. (I read Katherine Mayo's "Mother India".)
If there would exist a movement for Free Banking, it would be natural to send out missionaries to South Africa, to the Negroes and to the Indians. By and by the Negroes would become economically independent from the Indian merchants, and the Indians themselves would learnt to do better things than to exploit their coloured fellow-men. A book on free Banking, written in terms that a Negro or an Indian might understand, would be one of the most useful books to be written. Obviously, Free Banking among such people cannot be introduced on the basis of a gold-stock, but it might well be introduced on the basis of Bill IV of the Four Bills. All observers agree that the fights at Durban in these days are due to economic causes. But economic grievances can always be conquered by Free Banking.
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A problem still to be solved is the answer to the question:
Is it more profitable for people and government (or perhaps for the government alone), to collect the taxes in notes of local Free Banks or firstly to emit a State paper money and then to prescribe: The taxes are to be paid in the issued State paper money?
In my book on the introduction of insurance in Asia, I proposed to collect the taxes in notes of local Free Banks. I asserted, that this kind of collection of taxes creates immediately employment at the very place where the taxes are collected and to the amount of the collected taxes, so that the burden is less felt than by other system. (The English translation is at some passages a little dark, but the French translation by the masterful hand of Prof. Buriot-Darsiles is excellent.)
Very truly Yours - signed: U. v. Beckerath.
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26.I.1949.
Dear Mr. Meulen,
in an investigation about the principles of Free Banking the case must be taken into consideration, that the banker - may he be a single person or a cooperative - has no possibility to procure bullion or gold coins.
Must Free Banking in this case be renounced, i.e., in a case where only a few persons can procure bullion or gold coins (essentially jewellers, dentists, watchmakers, etc., for whom the price of gold is of no importance)?
Or should, in such a case, Free Banking be prohibited?
I think we do agree, that in such a case Free Banking should not be prohibited, and the banker should be free to do what he can do to supply everybody with means of payment who, without his help, would not be able to pay, although he is in possession of claims, of goods and orders.
In such a case the banker must take care to secure the convertibility of his notes into goods in daily demand, of similar services (barber, street car, boot black men, theatres, movie theatres) or receipts for debts such as taxes, rents, wages and perhaps debts with a banker. The convertibility at every hour (not only at every day) is necessary because enemies of the banker may at any time spread rumours, or a general panic may occur, so that without any good reason the public suddenly wishes to get rid of the notes.
If the banker does no long-term business (that means here, finances mortgages etc. merely by issuing notes), but finds his debtors among persons or firms that possess goods wanted daily, etc., then the public finds no difficulty in converting its notes. Every case of a panic, in which, nevertheless, the notes are promptly redeemed in goods, services, etc., will raise the trust in the banker and assure him the opportunity for new business.
For the debtors of the banker it is no burden that they are under the obligation to accept the notes at any time for at their full nominal value. They can pay off their debts with the accepted notes on the same day or the next and save interest for the repaid amount. Suppose a panic like that of 1825 or 1857 or 1873 or 1993 in the US. For a bank constructed according to the principles here explained no other effect will occur than the reflux of all its notes within 2 days. Every note-bearer is satisfied, although he may be - - after his notes are now redeemed - - in great need of means of payment. The run is not at the funds of the bank but on the goods in the stores, etc., which will not displease the storekeepers.
For the greatest part of the world in the next years a Free Banking on the basis of a gold fund will not be possible, simply because the inhabitants - - bankers included - - have no possibility to procure (enough! - J.Z., 10.1.93) gold. Germany, Italy, the liberated Russia, Spain, the whole of Asia, all of Africa and perhaps even old England, the mother of the modern gold standard, will not be able to procure enough gold to do Free Banking business on the basis proposed by you. Should all these countries be told: "Without a gold fund no Free Banking! Help yourself as you can!"?
The answer would be: "It seems that Sir Robert Peel was in the right and Free Banking was only a thing good for the time before 1844. We see that Free Banking cannot help us. Then, in three devils' name, we have recourse to monopolistic banking or inconvertible State notes, which - - as experience shows - - do not need gold!
I am for Free Banking, even if all gold should disappear from the world!
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On the other hand, I do not go so far as to demand the prohibition of note-issuing banks on a gold basis not equal to 100% of the nominal value of the notes. But what I demand is the full elucidation of the public about the actions of the bank in the case of a panic, about kind and liquidity of the assets and all details which I enumerated in my dissertation about the propositions of Professor Milhaud, Chapter: Banks to procure employment.
I know, that you agree in all, what concerns honesty and candour in the note-issuing business.
May the two principles compete. The first great crisis - - which the politicians will not fail to procure from time to time - - will teach us which is the better principle. We will both learn from experience, our common teacher and that of all men.
Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 27. I. 1949.
Dear Mr. Meulen,
this evening I received with the greatest pleasure Benjamin Tucker's "Instead of a Book. I have two hours light today, from 20 to 22 o'clock, but I could not resist the temptation to sacrifice one hour to this book. I may open it at any page and it is difficult not at once to read all what Tucker said on that page. He was a wonderful man, and if the atomic bombs do not lay Tucker's admirers beside the many who know nothing of him, his ideas will win - - after 500 years, 5,000, or more.
The first passage I found was at page 55/56. Tucker's opinion about the selection of a jury. He proposes the selection by lot. That pleases me. In ancient Athens the jurors were selected by lot, probably also in other communities of antiquity. On page 28 Tucker speaks of the hazard of the ballot. Certainly, it involves a hazard hardly less than the honesty hazard: selection by lot. It seems to me advantageous to select even the deputies of a country simply by lot from a corps of, say, 1,000 men, with these 1,000 selected in a way I do not yet know, as supposedly the best of the country.
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That Tucker estimates Herbert Spencer's wonderful chapter XIX in his "Social Statics" as I do it, was a very great pleasure for me.
If I would have been dictator of the world, in 1918 or 1945, I would have enforced in all countries a law by which every person gets the right to give up his citizenship, is to be considered as a foreigner from the moment when he declares it and is no more subjected to a military service or the duty to contribute to reparations for passed wars. In 1918, as a result of such a law, millions of Germans would have "ignored" the State.
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My friend Werner Ackermann, founder of the Cosmopolitan Union - - a half-anarchist league, the word "anarchist" taken in the sense in which Tucker took it - - got some day the invitation of the Czechoslovakian Government to make regular reports about the successes of his union. (I have not yet seen this invitation, either. - J.Z., 10.1.03.) Ackermann got the impression that there were persons in the government who were considering the possibility to exercise a Czechoslovakian protectorate over Unions such as Ackermann's Cosmopolitan Union. Would the Protectorate have been possible, then, obviously, the Czechoslovakian government would have had a legal right to intervene in January 1933 in Germany. That would have been an easy thing in that month, more than 2/3rds of the German population being suppressed by the nazis.
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The chapter "A necessity or a delusion, - which?, page 256 ff, pleased me much. I do hope to find time and light to return to the chapter.
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I thank you very much for your wonderful present.
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Very truly Yours - signed: U. v. Beckerath.
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1. II. 1949.
Dear Mr. Meulen,
it seems, Winter has really begun today. Perhaps I cannot write to you for some time.
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It was my intention to write to you a bit about the first chapter in Tucker's book: "State Socialism and Anarchism", but probably cold will prevent me; therefore only a few lines, "instead of a letter".
I think it is of great theoretical and perhaps still more of practical importance to distinguish two kinds of socialism, as Tucker does, and not to take "socialism" as a synonym for State socialism, as the word is used in modern journal literature and even sometimes in scientific literature. (Article "socialism" in the last edition of the "Encyclopaedia Britannica".) Tucker is in perfect conformity with the older terminology in France, in Germany and, I think, also in England. In that literature always two kinds of socialism were distinguished - - the State socialism, sometimes called governmental socialism, and the numerous schools of liberal socialism, including individualist anarchism as well as communist anarchism, Christian socialism and Hertzka's "Social-Liberalism", and many others.
Very good is Tucker's distinction:
"There are only these two socialisms.
"One is the infancy of socialism the other is its manhood.
Forms of socialism like that of Hertzka ("Freiland, ein utopischer Roman"), the different kinds of Christian socialism, etc., are all kinds of individualist anarchism that were not quite thought through by their authors.
At the time when Tucker wrote his book, the system of Free Banking would, without difficulty, have been considered as a kind of individualistic socialism. For the propaganda it is by now means indifferent whether such a system is classified as a kind of socialism or as a kind of capitalism.
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When I was about 18 years old, I got for 10 Pfennige a very good German translation of the chapter "State Socialism and Anarchism". I became at once an adherent of Tucker and remained an adherent, unchanged ("an adherent invariably", still today.
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Do you think it possible to introduce a terminology like that of Tucker in modern literature?
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Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, …….. 5. II. 1949. Your letter of 2. II., received to-day.
Dear Mr. Meulen
thank you very much for the nice passport photograph. A phrenologist would say: Preponderance of the intellectual parts over those where the animal life is located. The little elevation in the middle of your skull he would interpret as interest for philosophy or religion. I do esteem Gall. He wrote his book after he had analysed more than 10,000 skulls of prisoners who had died in the great prison of Vienna. He compared the results of his analysis with the documents of the prison. Many of them he had known personally. He was the first physician of the prison.
You do not look as a man of 67, rather as one of 57.
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I did not overlook the possibility of a redemption of notes into notes of a well established bank. It was my intention to point out the possibility. In Germany no bank which merits the predicate "well-established" exists at the moment. Also the people does not trust the few banks in existence. The saving banks get few deposits. But the distrust turns more against the standard of the currency than against the honesty of the managers of the banks. If I get a little more light and time, I will return to the redemption in notes of a well-established bank.
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Amuck. The Malay "amouk" is just what I meant. But "amouk" is not simply the result of opium or bhang alone. If the "Amoklaeufer" feels, that the wrong inflicted upon him causes in his "soul" (sit venia verbo) an impulse to kill the whole world, he tries to get opium or bhang for the purpose of gaining enough courage to kill at least some of his fellow-men. But the fact, that such a feeling arises in him, proves - - that is my opinion - - the inclination of the Asiatic people to hold responsible the "collective" to which the wrong-doer belongs. I do believe that such an opinion is not expressed in the encyclopaedias,
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Collective responsibility. Can a group be responsible ?????
That it can be made responsible - - of course - - is admitted. Hitler made the Jews responsible for the Treaty of Versailles (I read in the "Figaro" an article, where a French Anti-Semite made the Jews responsible for the enormous advantages of this treaty for the Germans and proved that - - I forget how.) Hitler made Jews, Freemasons, Jesuits and some other "collectives" responsible for high prices (if he spoke to consumers), for low prices (if he spoke to farmers), for high rents (if he spoke to workers) and for low rents (it he spoke to landlords). But were they responsible??? Was it possible, that the Jewish people as a whole could be responsible for any bad thing in the world, for which it was accused by its enemies or for any good thing of which their writers boasted in the name of the Jewish people?
Moralists teach that groups cannot be responsible, only individuals can be responsible. Individuals may constitute a group or a society which performs anything blameable or praiseworthy, but also in this case it is not the group or the society to which responsibility is to be ascribed, but the single man or women, who participated or did not what he or she could do to prevent it, in responsible.
I will not refer to Kant who says: A man In responsible only for that which is in his power. The words of Kant are of little or no weight for men that did not read him. But what say thinkers like Hume, Adam Smith ("Theory of Moral Sentiments"), Spencer or Benjamin R. Tucker? I am convinced that they agree with Kant. Sure, they did not know him; but I do not possess their books and am unable to verity this.
(In "Instead of a Book", which I do possess through your kindness, Tucker does not treat the theme. But certainly such a universal thinker as Tucker had an opinion about it.)
Sometimes even people to whom collective responsibility is a natural kind of feeling and thinking are, by reality, led to the fact that belonging to a group constitutes no part of responsibility for actions of some members of the group, even when "some" means the vast majority. In Morse's "Guilds of China" I read, 20 years ago, an instructive story of the barber union in some Chinese town, perhaps Ning Po. There was a barber who shaved his customers for a price lower than the union price. The union resolved to kill him. Some learned members studied the laws and found that the legislator had forgotten to fix punishments for biting a man to death. That was, what they wanted. The union decided to surprise the guilty barber and, after he was fettered, every member must bite him in the neck to achieve a collective responsibility. Obviously, they attained what they intended. The mere fact that a barber belonged to the union did not yet constitute a responsibility for him. I do not know how the authorities of the town or the province treated the case; probably they did nothing.
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You say: "I am ready to accept responsibility for our Labour government actions". Let me remark that you do not accept the responsibility in your quality as a friend or (perhaps) member of any of the political parties which, some years ago, tried to prevent the Labour Party from taking possession of the government. You are quite right to decline that kind of responsibility. Also you do not accept the responsibility in your quality as an English subject and especially a subject of the present government. You are perfectly right to decline that kind of responsibility, seeing that to be an Englishman or not is a fact not within your power. But if you say: I did not what I could to enlighten my countrymen about what must come after the election victory of the Labour Party, then I cannot contradict. (Kant says: Never was a man born or will be born who did all he could or can for the world's moral progress.) But this kind of responsibility is no collective responsibility but a personal one.
(Let me confess a guilt - - or even a crime - - which is much more than 1000-fold greater then your "sin" and still troubles me. I am responsible for the second world war. Do not think that I am crazy. It was a short time before the war. I stood on the platform of a streetcar while it passed the Potsdamer Strasse. Suddenly all vehicles stopped. "The Fuehrer passes"! His auto came along the street, quite slowly. I saw it coming and calculated: It will pass at a distance of not more than one meter from my platform. I had a pistol, loaded with six cartridges, in my pocket. That was necessary at that time for every one who was under observation of the State Police, and I knew I was. (I wrote to you, that the police had arrested me for my dissertation, published at Geneva, "The propositions of Milhaud", but released me after a short time, and - - to tell the truth - - without torturing me. But they watched me, opened all my letters etc.) I knew what would be my fate if they arrested me for a second time. I had the pistol in the pocket to kill myself at once, if they arrested me. My friend Unger had always poison with him. But he was fettered before he could use the poison and was murdered with so many Jews at Auschwitz. The pistol was secured by the safety catch. I reflected: Will I have time enough to remove the safety catch? Or will I be beaten down by the neighbours before I can fire? Will I be observed if I put my hand into the pocket? It would have been my duty to take the pistol out at once, unlock it and fire, at any risk. It would have been done in less than two seconds. I did nothing and let Hitler escape.)
(He told me another detail, namely, that an SS-man stood next to him, who could have easily beaten down an extended arm pointing the pistol. Could he have taken the safety off, while it was still in his pocket and could he have shot and hit his target out of his pocket or with the gun close to his body? While his intellect pondered his chances, the opportunity passed. He wasn't one of those trained for a quick draw and fire. Anyhow, Hitler and he had still to teach many and quite opposite lessons to the world. Among them: Readiness to commit tyrannicide, rather than actions under the principle of "collective responsibility", like the presently planned "war against Iraq". - J.Z., 10.1.03.)
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6. II. 1949.
You say: The Germans choose Hitler. Did they? Many millions certainly voted for Hitler. But many millions voted against him.
Are they responsible for Hitler's crimes ?
Many voted against him and their votes were counted for him, especially in the districts in the East of Germany, where the election offices were in the hands of the nazis, who falsified what they could. But this fact does not morally relieve the voters for Hitler and it does not justify the voters against Hitler (that they believed - J.Z.) that it was not within their power (to do anything more against him. The text is not clear here. I interpreted it as best as I could. - J.Z., 10.1.03.).
Those who voted for Hitler simply believed him and most of them did not think of a war. Are they guilty for their stupidity? Then the French, who voted in 1789 for Robespierre were guilty and, from the standpoint of collective responsibility their descendants still are guilty. (Robespierre was - - at that time - - a strong adversary of capital punishment, who very probably himself did not yet know what a role he would be able to play.)
(According to mere hearsay "evidence", Nazis managed to confiscate whole election urns and to replace them by their own prepared ones. Those who knew about such actions were already terrorised before the Nazis came officially into power. - Nazis had no more respect for formal voting rights than they had for any other and genuine individual human rights. - Their "arguments" consisted often merely in the brutal use of a thick rubber stick with a flexible steel core. My uncle was one of those young thugs, still proud of his "activities" for some years after the war. He was very disappointed when, after Hitler took over, and they systematically visited known communists in their neighbourhood, in armed gangs, to at least beat them up and then, and quite frequently, their intended victim opened the door and showed them his newly acquired Nazi party membership card. Those they did not beat up. Others were considered to be "fair" game, this time with official approval. - Not that the communists would have treated them differently, if they had won. - J.Z., 10.1.03.)
You are right: It Germans everywhere had held meetings against National Socialism, it is unlikely that the Nazis would have come to power. Let me add: They would certainly not have come to power.
(J.Z.: Here he should have mentioned that for years before the take-over of power by the Nazis, there was no longer full freedom of assembly in the Weimar Republic. Gangs of armed communists and nazis roamed the streets and disturbed all democratic meetings, when not fighting among themselves and against the police. Other Germans were largely disarmed or not militarily organized and trained for the protection of their rights. Just as they are not armed and sufficiently organized and trained now, in most democratic countries, for the same purpose. - J.Z., 10.1.03.)
Insofar you are also right: All men, who could have organised meetings and did not, share in the guilt of such a punishable political indifference. But it is their personal guilt not a collective one.
It should also not be forgotten that the truly guilty ones were the leaders of the army, who used the National Socialist party and Hitler as a tool of their polities, or believed to be able to use them, while this experienced fox knew already what would be the further way of the army, the party and, consequently, of Germany. A people - -
or, more exactly spoken, a collective of subjects - - for what is a "people"? - - is always a body without a will, in the hands of the countries army, except when the country possesses a militia, a fact of which Adam Smith speaks with much wisdom, and it is worthwhile to reread the passages in "The Wealth of Nations". (I cannot tell you in which chapter - - I think one of the last - - the passages are contained. The book was destroyed with the 3,000 others on the 22nd of Nov. 43.)
And if there (were a "people" and "collective responsibility" - something remained unstated here! - J.Z.) will anyone construct a guilt of the subjects (the always defenceless subjects - - also in the so-called democracies) - - for the acts of their governments? I assert that those most guilty for the occurrence of WW II - - my insignificant person set aside - - were the members of the governments of France, Belgium, England, Poland, etc., who did not mobilise at once in January 1933.
They must have seen and some of them certainly saw, what the stupid voters for Hitler did not see: that the devil of war had won his first position.
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You know, that in the year 1932 seven men, friends of the Dr. Ramin, of whom Zander will have you told many things, met every week and often two or three times a week, to, frame the Four Bills. They were convinced that Free Banking was the only real remedy for National-Socialism as well an unemployment and, therefore also against war.
While they framed the Bills, they could not prepare meetings of electors. I hope you will admit that these seven men deserve a special criticism (rather: consideration! - J.Z.) when the guilty of that time are identified.
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Your remarks about Scratchley's "Industrial enterprise societies" are correct. Also what you say of the difference between these societies and building societies is true. In my comparison - - which I took from Scratchlyy - - it was my intention to call attention to the similarity of organisation. The business methods are different.
Let me remark, that In England, and still more in the US, there exist banks, which grant credit without pledge. (Asking for securities for their loans. - J.Z.) Their interest rate - - of course - - is higher than the usual one. But the most astonishing fact is that the losses of those banks are not greater than the losses of mortgage banks. In the USA these banks are so numerous and do so such an important business, that they could create an association, the "American Association of Personal Finance Companies", which even publishes a year-book. I possess the year book of 1933, with most interesting details. One of the 18 members in the State of New York was:
Roy E. Tucker, Beneficial Management Corporation, 2 Lafayette Street, New York. (Related to our Tucker???)
Honesty is the best and surest pledge. And the number of honest businessmen is - - as statistics teach - - much greater than is generally believed. Benjamin R. Tucker would haven taken from the statistics an argument for his view that the State is no necessary condition of sure (secure? - J.Z.) business.
If you like, I send you this year-book. As seat of the Association is indicated: Washington, D.C., no street and no post office box. (Oh, - - excuse me - - now I see it: In the list of delegates attending the convention of 1933 at Chicago, is mentioned: Edgar F. Fowler, Secretary of the American Association of Personal Finance Companies, Washington, D.C., 712 1/2 Tower Building.)
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Officials of savings banks in Germany told me that credits to mechanics and other people, unable to pledge the usual securities, were the best and very seldom caused losses.
(That information agrees with e.g. reports on the security of loans to poor but promising students, provided they are administered by businessmen and not by government bureaucrats. Alas, the latter have almost completely replaced the former. - Obviously, few government enterprises are managed profitably, unless they possess the legal monopoly for a very important business. - J.Z., 11.1.03.)
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I regret that your idea of liberty is somewhat different from mine. However, I am not yet quite convinced that it will remain different if we come to an understanding on what liberty really means.
Firstly: What you say - about the education of Indians at English Universities agrees with an article I read very many years ago. The author said: If the English do not find jobs for the many people they instruct at their universities, the unemployed must become revolutionaries. Writing revolutionary pamphlets and pressurising rich and other people to contribute money for the sale the "nation", is then the only means for them to get something to eat.
Now imagine, there would have been in England somebody who organised regular meetings among the Indian students and explained them the advantages and the management details of Free Banking, applied to India, what would have been the effect? All students, if they would not have found another job, would now work in the business of Free Banking. India would have Free Banks, and many English would have said: Why do they have
Free Banks and not we? The National Movement would be confined to the cultivation of Indian philosophy, folklore and such things. The people would be much richer than they are today. The Indian notions on liberty, self-government and equality would be of another kind than they are today. If there would have come one of the average propagandists for home-rule (with a political vocabulary of about 150 words and two dozen slogans) and would have shouted: I am born between Nepal and Travancore - - I am your rightful leader - - you must elect me - - for I, I am no stranger - - you know - -, people would have answered: Yes, we know such men as you - - How will you distribute the taxes, when you are elected? You do not know it? Have you not thought about it? And what civil law will you propose? You have not yet meditated upon a civil law? And what is your meaning of Free Banking? You do not know about Free Banking? Oh - - darling of all holy cows, go home, learn something and then present yourself once more!
(J.Z.: English universities, like most others, would probably not have been the optimal environments for such teachings, since in their "scientific" economics departments such ideas would have been outright condemned, called "rubbish" or dangerous or utopian etc. by recognized "authorities". A well organized "free university" might have been. But if, in India itself, there had been enough and sufficiently informed advocates of Free Banking and if they had attained the same privilege that religious teachers have to visit and talk with prison inmates, then most of India's future political leaders, then political prisoners, could have been reached there, with monetary freedom ideas. The prison authorities would not have feared such teachings but merely ignored them, as those of "money cranks", as they ignored the teachings of various religious sects. But so far no genuine school for monetary freedom, no tolerant and informed "missionaries" for it, no correspondence courses, no serious of lectures and lecture notes, discussions and conferences on monetary freedom, on audio and video tape, online, on floppy disks, on CD-ROMs, are offered anywhere, to my knowledge. Even the microfilm publishing and reading options are still largely ignored, although I offer on microfiche probably more on this subject than any other publisher has done so far in any medium. Most of this knowledge is widely dispersed and unknown and inaccessible, long out-of-print and un-translated and even the advocates of it are not listed anywhere together. They think about free exchange media (not yet enough about their technique) but have not yet managed to use very affordable and powerful alternative media to get their kinds of exchange media and value standards into circulation, at least for theoretical consideration! Although they are free market advocates, they have not yet established an efficient market for their ideas and techniques, bringing demand and supply in their special sphere together! Monetary freedom advocates have not yet freed themselves of reading and publishing habits, customs and traditions which keep them in "chains", largely unheard, unnoticed or unappreciated - and also insufficiently enlightened themselves, so that they cannot become effective pioneers for monetary freedom reform movements or revolutions. To that extent they are "stuck" with their efforts, as progress in India is held back by various religious myths and movements and progress in other countries by various flawed ideologies with greater appeal in territorial elections. Nor have they managed so far, to subscribe all to the theory and practice of monetary tolerance. In this sphere, they too, have largely remained intolerant zealots, instead of welcoming any kind of experiment among volunteers at their risk and expense. - J.Z., 11. 1.03.)
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Deserves, what the Indians now have, the terms liberty and home rule? Are not more than 90 % of the people much more delivered to the arbitrariness of the officials? Are they not much less protected against outbreaks of fanaticism?
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I doubt that under the present conditions the Indians are able to get political experience and learn what freedom, foreign rule and such things are.
In the middle ages the little republics of Italy chose every year new capitani regenti. There was a law that the capitano must be a foreigner. Nobody interpreted this useful law as a law to "deliver the community to foreign rule". If the Indians get political experience, they will accept the old Italian law.
(Experience with territorial politics as usual is not all that desirable and offers more failures than successes. Sometimes even B. forgot about the panarchistic alternative - that of full minority autonomy or of experimental freedom in the political, economic and social spheres, and thought and wrote only in terms of the usual territorial, democratic and republican politics. - J.Z., 11.1.03.)
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I learn with great pleasure that next March or April you will, perhaps, come to Germany. If you visit Berlin, please try to get permission from the British Information Centre to start there a lecture about "Note Issuing Banks in England and Scotland before 1844 and their contributions to better the standard of living of the working class." That looks quite innocent. But perhaps you will be in a position to lay a cuckoo-egg into the nest of the monopoly bans, one that produces a big cuckoo, unpleasant to the existing banks.
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The first effect of inflation (abusive augmentation of the circulating currency - - the word inflation taken in its old and true sense - - is always and invariably the rising of the price of bullion, then of other metals and then of other and non-metallic goods, the prices expressed in the notes that are subject to the inflation. If there is liberty in the country, the economists warn the people and say: People, do not conclude contracts in terms of paper money. Use the paper money only as a means of payment, not as a measure of value. And if you can, refuse the inflated paper money (Inflation proven by the high price of bullion etc.) and demand honest money. Four weeks later all people decline the inflated money and use honest banknotes and by that stop inflation.
Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 9. II. 1949.
Dear Mr. Meulen,
You say, that you do not acknowledge duties. The manner in which you write "The Individualist" refutes you. It is impossible to write in this manner without feeling a duty to do so, the word "duty" not taken in a religious sense but in a philosophical one.
Kant says: It is not in a man's power to acknowledge his duty or not. It is in his power to fulfil his duty or not. The sense for duty is one of the expressions of his personality. (Benda [?], pag. 110/111.) Just the autonomy of a man's will leads to the idea of a system of duties derived from the man's nature. Kant declines the religious notion of duty. He says: If duties were described by a god, that is, a very powerful demon, so as the churches represent him, nobody can be sure that this demon will not, tomorrow, prescribe the contrary of what he prescribed yesterday. This is demonstrated at all times by the history of sects which imagine to get special revelations from their god. Some months ago, at a little village in Oldenburg, members of a sect heard "voices" that ordered the sacrificing of children. The children were bound on chairs, but before the leader of the sect had cut their throats, the police entered by force and freed the children. One of the members, to whom the divinity of the voices was suspect, had notified the police.
Schopenhauer says: If a man fulfils duties which do not lie in his nature, he soon will feel repentance exactly like another man feels, who neglected his duty.
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Duty derived from prescriptions of a god such as the old-Jewish Jahweh and duties derived from a man's nature are very different things, even if, in some practical cases, they coincide.
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Kant talks much of God, his holiness, etc. But it is a kind of God, which no church will endorse. The value of this god - - considered from the standpoint of an average priest - - is not better than Spinoza's "Deus", by which he simply meant Nature. He would have called the moral principle, which he called God, by another name, if not, at his time, the booksellers, who sold "atheistic" books were imprisoned, except in Prussia (as long as king Frederick II lived.) Some pupils of Kant referred to some utterances of Jesus Christ in the last years of his life, by which he confessed a kind of God very different from the old Jahweh, who demanded the blood sacrifices of animals. I believe that the well-known scene, where he drove the cattle, pigs and dealers etc. out of the temple, as a protest against the bloody sacrifices. The word, that he would rebuild the temple in three days, if it would be destroyed,
gets a quite different sense if it is considered that the Hebrew word for "temple" meant a building as well as a religious community, such as the world "church" in England, the word "Kirche" in German and the world "église" in French. It seems Christ would say: If the present Jewish community would, for any reason, be dissolved, I, together with my adherents, am able to create a new and better one in three days, a remark which could easily be misunderstood. Kant is convinced that he had prepared a kind of religious general strike, beginning with a refusal to pay the temple tax.
Very faithfully yours - signed: U. v. Beckerath.
(No wonder, then, that the recipients of these taxes wanted to crucify him! - J.Z., 11.1.03.)
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U. v. Beckerath, … 9. II. 1949.
Dear Mr. Meulen,
the plan of granting long-term credit by notes of a note-issuing bank is -- as in German financial literature often exposed - - the same as issuing mortgage-bonds in small denominations without interest. I would not object if the conditions of the transaction are fully and clearly stated on the notes. Maybe that some people would even prefer notes, that are secured in this way, to notes founded exclusively on short term credits. I confess that I met people, who told me that, in spite of all my reasons against so secured notes, they would prefer notes founded on mortgages. (There are other long-term credits than mortgages possible, but probably mainly mortgage credits will be demanded from a note-issuing bank which grants long-term credit.)
The opposite of such notes would be notes that bear interest. At the moment I remember only one experiment on a large scale and that experiment seems to have been essentially successful. During the American Civil War, from 1861 - 1865, the Government of the Northern States issued such a money. The details were - - I must cite from my bad memory - - about the following:
On a note of 10 dollars was printed that it would bear 1/2 % interest monthly. Date of issue (say): 1. I. 1862. Value for which it was accepted for paying taxes:
From 1. II. 62 - 1. III. 62 = 10.05 dollars
1. III. 62 - 1. IV. 62 = 10.10 dollars, etc.
The note bore compound interest, so that after a year it was accepted for 10,62 dollars, after 5 years for 13.49 dollars, etc.
In the first months the public did not care much for the interest. The notes circulated at par. But in proportion to them growing older, the note-holders kept them in their portfolios and after a short time they practically disappeared from circulation.
Perhaps it would be worthwhile to repeat the experiment in private note-issuing business. The volume of the credit business possible on that basis will - - I assume - - never be very great, but in economic spheres, where it is possible, it should be applied.
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Interest is a thing which can neither be fixed by governments (although people and governments themselves think they can fix it), nor can it be abolished, nor can it be artificially raised. Offer and demand for capital decide alone. In the present state of the economy in all countries, the demand and therefore the value of future things is less than the value of present goods. In 100 years or 50 it may be the reverse.
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Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 14. II. 1949. Your letter of 9. II., received 12. II.
Dear Mr. Meulen,
the most important passage of your letter: "Apparently you approve the nationalisation of land."
It must have been my inferior knowledge of the English language which caused such a misunderstanding. My opinion is, that private land capitalism in its worst form is preferable to "nationalisation", that is to State capitalism in land.
Private capitalism leaves always some hope for reform. State capitalism is always hopeless and can only be reformed by a war, if the enemy of the State, in which land is nationalised, is victorious.
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In 1921 I read in the German journal "Die Bodenreform", published at that time by Damaschke, certainly no blockhead, that all increases in the value of the land since 1914 should be confiscated by the government. Damaschke, even in that year, had not yet observed that Germany was amidst an inflation (General index number: 1913 = 1, 1921 = 10 - about), and that the increase was merely an increase in paper-mark. Calculating the value of land in gold, there was, in pretty much 99 % of all cases a reduction. Damaschke was reputed to be the most prominent pupil of Henry George in Germany and he demanded such a nonsense! (Damasche wrote a book on the history of political economy, which is not bad, compared with the average histories of political economy. He also wrote a book on rhetorics which is well written, but all erudition and dexterity in managing meetings did not prevent him from confounding a standard based on forced currency with a standard based on the value of bullion at the jewellery market.)
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I possess many writings Major Douglas. My impression was: The worst variety of State capitalism until now invented!
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I hope to be able to write to you some words on the Gosaba experiment.
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I agree with you about Free Banking managed by private bankers.
But if no private bankers are found to render the necessary services to people, which are not "creditworthy" in the opinion of average bankers, and if such people get the chance to help themselves by cooperatives, then they should be permitted to do so. I know that on this point we do agree.
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I must close. Lack of light, the old evil.
Very faithfully Yours - signed U. v. Beckerath.
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U. v. Beckerath, … 15. II. 49.
Dear Mr. Meulen,
I beg to invite you to frame a Bill, by which
a.) the law of 1844 is repealed,
b.) the state of right concerning tradesmen's tokens is restored.
In issuing tradesmen's tokens the storekeeper acted as banker issuing notes, but the storekeeper was not bound to keep a reserve in gold or in notes of other banks, but was merely obliged to accept them in his business as cash money. I read two books (forgot author and title) (on the subject - J.Z.) at the Prussian State Library before it was burned.
What a storekeeper can do, certainly a banker can do. (An association of shops! - J.Z.) But it seems to me advantageous to avoid, in this connection, the word banker. "Manager of a private clearing house" would be a better name. People knowing the language better than I do, will find still better names.
(Name ist Schall und Rauch" - "Name is sound and smoke" - said Goethe. Here the great man was mistaken.)
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The bill framed, its text should be published in "The Individualist" and the adherents invited to subscribe to a petition to Parliament.
Very faithfully Yours - signed: U. v. Beckerath.
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NOTE BY JOHN ZUBE, 11.1.2003:
I am repeatedly asked for a short description for the practical introduction of monetary freedom. - How much shorter do you want such a description to be than the above?
Another short bill could propose that the centuries of indiscriminate legislation and jurisdiction against "truck" or "truck payments" or "truck tokens" for the payment of wages be repealed, with the following qualifications:
1.) that all arrangements of this kind, to be quite legal and upheld by the courts, require agreement between
employers and employees (may be, initially, also of trade union functionaries - they could not risk vetoing them
forever), indicating that they consider them to be preferable to the present and monopolistic condition for
payments in this sphere, which might make them unemployed or bankrupt them,
2.) all details of such arrangements and procedures and their functioning should be very well published.
3.) all such notes, certificates, claims etc. should be freely and publicly market-rated against optional value
standards, i.e., that they would be legal tender at their face value only towards their issuers,
4.) that all people not contractually obliged to accept the notes and to accept them at par, should be free to refuse
or to discount them,
5.) that there exists a standing invitation for any proposals to further improve such voluntary payment and clearing
arrangements, together with an opportunity for their publication and discussion. (Alternative media would make
it easy and cheap to fulfil this condition.)
Such repeals and rulings would give all the parties concerned an incentive to so design alternative wage payment means, in continuance and rapid development of the old truck payment, truck token and truck shop tradition, and that of "canteen money" or "fichas", or emergency money notes, so that they would become really satisfactory and even superior and competitive - compared with the present monopoly money.
Via shop and service foundation for them, they could always be plentifully supplied, just to the extent that they are needed at any time and location.
The "truck shops" redeeming the "truck-notes" with which wages and salaries could then be paid, should be set up and run as consumer cooperatives of the employees (To avoid accusations of "double exploitation" by the employer and to let the employees appear as money providers for their employer!) and, as soon as possible, other shops, that are willing to accept these notes, and to provide "shop-foundation" for the further issue of such notes, should be included in such private, cooperative and voluntary payment communities. Together, they could form a cooperative issue, acceptance and clearing centre for optimally improved local truck notes, gradually becoming a local currency.
If the present monopoly money, with its coercion, deception and enforced uniformity and its central banking powers and privileges were really providing a superior service, then its advocates should not be so afraid and so prohibitive towards such a competition. Let us see, who would have the last laugh! Really effective currency issuers and managers would get many more opportunities to prove their abilities. The failures among them would be dropped as fast as possible.
Cases where employers were enabled, by such payment agreements, to avoid laying off large numbers of employees and also to at least partly solve their sales problems at the same time (via "truck tokens" or clearing certificates, that they issue themselves and use to pay, not the employees but the own suppliers and other costs, and which they oblige themselves to accept and redeem, but only in their goods already produced and their ready for sale services), should be well reported in the media.
"A journey of a thousand miles begins with a single step."
All would be voluntary, negotiable and correspond to the degree of enlightenment achieved in this matter among the voluntary participants.
Nothing but outright fraud, deception and coercion would be prevented by the remaining legislation. And this is as it should be.
This gradualist, voluntary, self-help, contractual, experimental, pragmatic and practical and also freedom-loving approach should especially appeal to Englishmen and Americans. Between them they would either come to develop or to find and recognize sound theories for their free and effective actions. - J.Z., 11.1.03.)
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U. v. Beckerath, … 19. II. 1949.
Dear Mr. Meulen,
a German monthly published last year a gruesome picture: A man of Russian type walks in the streets of an American town. Darkness. The man is alone. In his hands he carries a trunk. The heading of the picture assures that he carries an atomic bomb. After some time - - some weeks - - some years - - the bomb will explode at the place selected.
In October 1948 an article in Collier's Magazine demonstrated openly such a possibility. I think I wrote to you about it.
Is any protection possible????
Perhaps.
You know and probably better than I that some somnambulists and such people are endowed with the gift to feel
the presence of metals and, very probably, also the proximity of radioactive substances.
Atomic bombs, although well enclosed in a trunk by lead, cement or other substances, will not be protected so well, that not some influence of the bomb is felt by the somnambulist . If the somnambulist walks through the town, he will feel the, bomb. Experiments with somnambulists and radioactive substances could easily be organised.
Perhaps even dowsers would be able to detect the influence of hidden atomic bombs.
Would it not be a theme for the Society for Psychical Research?
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Very truly Yours - signed Ulrich von Beckerath.
(J.Z.: Rather: Support tyrannicide rather than mass murder, i.e., individual responsibility rather collective responsibility. Insist on exterritorial autonomy for all dissenters, not only in the USA, Russia, China, the Middle East, Africa etc. Clarify that nuclear weapons are morally no better than extermination camps. Exterritorial autonomy for all minorities would also eliminate targets for ABC mass murder devices. Via free banking, free trade, cooperative and partnership production, create so much wealth opportunities for all that hatreds are minimised. Involve all people in the finding and destruction of mass murder devices. For more such notions and some details see my two peace books. - J.Z., 22.5.03.)
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(J.Z.: That reminds me of one joke on the smuggling in of nuclear weapons by Soviet agents:
Indeed, you could provide nuclear weapons for this mass murderous purpose - mostly victimising those whom you consider to be the exploited and suppressed proletarians of the world. I also agree that you are capable of smuggling-in suitcase-sized atomic bombs. However, where would you get the suitcases for them?
The famous nuclear scientist, Robert Oppenheimer, once asserted that there exists a simple tool to find any hidden nuclear weapon: Namely a strong screwdriver, with which to open every box and cupboard in the country to check for them. Otherwise you could not detect them. That joking suggestion also implied that a few government inspectors, like now in Iraq - - according to yesterday's radio news they were begging the Iraq regime to help them! - - could, obviously, not cope with this task. Would Hitler, Stalin, Mao or Castro or Idi Amin have helped, in such a situation? Almost the whole of the people would have to be involved as inspectors against ABC mass murder devices. That is their right, even their duty.
As for the sensitivity of some people: I met a woman once, in a railway trip along the Rhine, about 12 years ago. She asserted that she knew a person who would be sensitive to any atomic test explosion on Earth and had announced to her friends many of them - before they were officially reported. Whether she was also able to detect dormant nuclear weapons was not clarified. A lively discussion resulted but it annoyed one of the other passengers very much and we allowed his strong protest to shut us up! I doubt that we were noisier than the train. Apparently, he preferred the continuance and the realisation of the nuclear threat to a mere discussion about its prevention. People! Myself included! We should have shut him up or continued the discussion elsewhere - but did not. People do not always do their duty. Even I don't. - J.Z., 11.1.03.)
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U. v. Beckerath, … 20. II. 1949.
Dear Mr. Meulen,
in the year 1980 the celebrated telephone-inventor Bell invented an ingenious apparatus which he called "Photophon". By that apparatus Bell was able to send acoustic waves at pretty great distances with the aid of a mirror and a plate of selenium.
When from one side sound waves were directed against the selenium plate and the other was used to reflect a ray of sunlight or other light, the ray transported the acoustic waves to a great distance. I possess an old Encyclopaedia (Meyer's Konversations-Lexikon, vierte Auflage, published 1889) in whose 13th volume, page 542, at the heading "Radiophonie", Bell's "Photophon" is mentioned. At page 28 of the same volume the apparatus is copied.
The transmitting of acoustic waves by light was nearly at the same time performed with the help of another physical principle, discovered by Mercadier. In the article "Radiophonie" the proceeding is shortly demonstrated.
The matter is now - - as it seems - - quite forgotten. Some years ago I had an opportunity to direct the attention of a German Professor to Bell's invention. He did not know it and treated it with contempt, taking the thing as a toy. In a standard work like Nostrand's Scientific Encyclopaedia nothing is said about the transmission of sound by light. But I think in older editions of the Encyclopaedia Britannica Bell's invention and that of Mercadier will be mentioned.
In the last months I thought often about Bell and Mercadier. At their time ultrasonics were not yet known. (As far as I know.)
Would it perhaps be possible to send ultrasonics by light? And if it were possible, can bombs and especially atomic bombs, resist ultrasonics? I think: not!
A reflector of the kind used in war against aeroplanes, but equipped with a selenium mirror, would perhaps destroy the bombs in the open air, that is, before they arrive at their target. Vice versa, it would perhaps be possible to attack, by ultrasonics, stores of bombs from an aeroplane.
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Do yon see any possibility - - provided that you do not take the matter to be useless or fantastic - - to call the attention of an officer of the airforce to Bell's invention????????
I have no connections.
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Very truly Yours - signed: U. v. Beckerath.
J.Z.: If I remember right what I read and heard about it: The mirror was flexible even to sound-waves. Thus sound-waves reaching it, while it transmitted light over a distance, to the other side, which had a selenium plate, the light strength received at the selenium plate did vary with the flexing of the mirror. Selenium turns light into electricity and that varied strength of electricity was then used to flex a thin plate serving as a speaker. Thus the system could carry the sound over a limited distance but beyond the reach of sound on its own. So far so good, sound transmission along the line of sight. Comprehensible and explainable by what is known. But then the unexplained happened. The contraption also worked with the selenium and the loudspeaker removed! Somehow the light had carried the sound directly. How? That was not explained nor, to my knowledge, was explored and explained eve now. Telephones worked better otherwise. So these early experiments and their results were largely forgotten. Ultrasound, so carried, might be turned into an effective defensive weapon e.g. against IBMs or nuclear bombers. - J.Z., 11.1.2003.
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U. v. Beckerath, … 24. II. 1949. Your letter of 17-th February, received today
Dear Mr. Meulen,
what a pity that you do not come this Spring to Germany! A lecture on Free Banking, delivered by you at the In-formation Centre could have become the beginning of a development.
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You express the opinion that nobody, even a few months before the war could have been certain, that Hitler would invade Poland. Here in Berlin everybody was certain. Immense halls were built - - obviously for military purposes - - near Berlin and Potsdam, and the workers were strictly ordered to speak of these halls even in family circles only as "sports halls". I heard from a friend, an architect, that many workers were sent to prison for having talked of these buildings by their right names.
I heard from workers in watch factories that they were making clockworks for bombs and nothing else than that. At that time it was impossible to write about these preparations to foreign countries. I invited my friend, the Professor Fauconnet of the University of Poitiers, who speaks better German than I do, to come at once to Berlin, visit me and talk with me about most important questions of the Schopenhauerian philosophy. (We are both members of the Schopenhauer Society.) But he did not understand me - - of course - - and I had no possibility to communicate what I daily saw and heard to anyone abroad. Letters to foreign countries were all opened by the Gestapo. If Fauconnet would have reported at Paris what was here prepared, perhaps Blum - - although ordinarily a passive man - - would have mobilised the French army. Such military action, in 1938, would have cost less than 100,000 men.
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Collective Responsibility. Many millions of Germans would have done what was in a man's power to overthrow the Nazi- Government at any price, even if the price would have been that Germany, in future, would be governed by the English, the French or any other, except the Soviets. But these millions had no possibility to act in any way. Nobody can make them responsible for such a situation. At least these millions should be exempt from actions on the principle of collective responsibility.
An eminent author of our times wrote a word in the February number of "The Individualist", page 6, line 9:
"How foolish are the voters."
That's right! But foolish men - - in this case the millions that voted for Hitler - - are not responsible, although their neighbours may keep them in dependency until some security is given that they are no longer as foolish as they were. (The brilliant author hinted at discovered foolish voters not only in Germany.)
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(My typewriter ribbon is worn out - - but new ones cost West-mark - - DM 3 1/2 for a bad ribbon.)
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Free Banking In German. I will not object to a Banking Plan on the basis proposed by you, a plan that includes a redemption of notes in gold at the price quoted at the exchange. Let this system compete with others, but let it openly state its plan quite openly! On this point we agree.
By the laws of the Allied even the possession of Gold is prohibited in Germany (as well as in the US and that they call progress), but you are right, all should be done to restore a bullion market in Germany.
Also the gold clause should not be longer prohibited in Germany. Debtors should be permitted to grant to their creditors the gold clause and this in an honest manner.
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For all government activity, especially in the economic sphere, it is true what the great Goethe says in his "Maxims" ("Sprueche"), third section:
"Es ist nichts schrecklicher als eine taetige Unwissenheit." ("There is nothing more terrible than ignorance in action!")
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Light will be extinguished in a few minutes.
Very truly Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 25. II. 1949 Your letter of 22 . II., received today.
Dear Mr. Meulen,
In his "Doctrine of Virtue" (Tugendlehre), Part: "Ethische Elementarlehre" (Basic Ethical Teachings), $ 2, Kant says:
There exist duties of man against himself.
Suppose: Such duties would not exist, then no duties would exist at all, also no duties of one man against the other. - - Only if I can oblige myself against myself can I be obliged towards others. The moral law which fixes my obligations against others, is in all cases founded on my own practical reason. The own reason compels me, but the compulsion is imposed by myself.
In German:
Es gibt doch Pflichten des Menschen gegen sich selbst. Denn setzet es gaebe keine solche Pflichten, so wuerde es ueberhaupt gar keine, auch keine aeusseren Pflichten geben. - Denn ich kann mich gegen andere nicht fuer verbunden erkennen, als nur insofern ich zugleich mich selbst verbinde; weil das Gesetz, kraft dessen ich mich fuer verbunden achte, in allen Faellen aus meiner eignen, praktischen Vernunft hervorgeht, durch welche ich genoetigt werde, indem ich zugleich der Noetigende in Ansehung meiner selbst bin.
Translated into a more modern Germans:
Pflichten des Menschen gegen sich selbst gibt es.
Denn, angenommen, es gaebe keine Pflichten des Menschen gegen sich selbst, so gaebe es auch keine Pflichten gegen andere. Gegen andere kann ich nur dann verpflichtet sein, wenn ich mich selbst gegen sie verpflichte. Das moralische Gesetz, welches meine Pflicht gegen andere reguliert, das geht in allen moeglichen Faellen aus meiner eignen Vernunft hervor insofern diese Vernunft praktisch ist. Ich werde moralisch gezwungen, aber derjenige, der mich zwingt, das bin ich selbst, bzw. es ist meine eigne Vernunft, die mich zwingt.
(There are duties of man towards himself. For suppose there were not duties of man towards himself, then there would also be no duties towards others. I can be only obliged towards others when I oblige myself towards them. The moral law, which regulates my duty towards others, originates in all possible cases out of my own reason, insofar as this reason is practical. I am morally forced, but the one who forces me is myself, rather, it is my own reason which forces me. - J.Z., 22.5.03.)
I confess, that I agree with Kant.
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In his "Metaphysics of morals" ("Grundlegung zur Metaphysik der Sitten") Kant says in the chapter "Development of popular ethics to a metaphysics of morals" ("Uebergang von der populaeren sittlichen Weltweisheit zur Metaphysik der Sitten)":
One found man bound through his duty to laws. One did not realize, that he is subject only to his own and, nevertheless, a general legislation. (Underlinings by Kant.)
(J.Z.: That is not far, in very general terms, from self-made or self-chosen legislation through panarchism, moderated through respect for all genuine individual rights and liberties that are claimed by members of other panarchies, which have and practice different laws, rules and institutions. Total exterritorial autonomy for individuals and their States and societies but combined with total tolerance and non-interventionism as far as the rights of others and their total autonomy in their panarchies is concerned. But also a far-going duty to help protect their rights and liberties against threats and oppression, to the extent that they do want to claim their rights and liberties. I.e., Orthodox Roman Catholics will not be liberated from the censorship they desire for themselves. - J.Z., 22.5.03.)
In German:
"Man sah den Menschen durch seine Pflicht an Gesetze gebunden, man liess es sich aber nicht einfa1len, dass er nur seiner eignen und dennoch allgemeinen Gesetzgebung unterworfen sei." (Underlinings by Kant.)
From these few lines one can already seen that Kant takes the concept of an "absolute duty" (Kant's German expression is "kategorischer Imperativ") not in the theological sense. An "absolute duty", in the sense of Kant, would be a duty whose validity cannot be refuted by any logical argument. In the work mentioned, Kant enumerates some of these duties:
1.) "Act only according to that principle which you may wish to become a general law."
(In German: Handle nur nach derjenigen Maxime, durch die du zugleich wollen kannst, dass sie ein
allgemeines Gesetz werde.)
2) "Act so, as if the principle of your action should become, by your will, a general law of nature."
(In German: "Handle so, als ob die Maxime deiner Handlung durch deinen Willen zum allgemeinen
Naturgesetz werden sollte." (Underlining by Kant.)
3.) "Act so, that you use humanity, in your own person as well as in the person of every others, never merely an a
means but always also as an purpose."
(In German: "Handle so, dass du die Menschheit sowohl in deiner Person, als in der Person eines jeden andern,
jederzeit zugleich als Zweck niemals bloss als Mittel brauchest.")
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In his critique of Kan'ts ethics Schopenhauer did not mention these important passages (important for Kant's philosophy - - the reader may reject or accept them) but pretended simply that Kant had taken his morals from the decalogue and preached theology. From the passages can be clearly, that Kant's morals have nothing to do with theology. (Schopenhauer's character was not the best, however profound his metaphysics were.)
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Kant's moral is not founded on altruism but merely on duty and duty is that what man's nature demands, as a being gifted with reason.
Kant adds that man's nature, as a being gifted with reason, not only demands duty but enforces it, like his stomach enforces eating.
The fact that in many men reason has not its full force (children, the majority of women, many average men, very old men) does not refute the cases where it acts in full force, the letter not being only demand but also a well-established fact. Kant gives as an example Spinoza. Spinoza was a very dutiful man, but obviously not because he feared an avenging god or believed in authorities.
(J.Z., 12.1.03: Full force? How many Spinozas, Kants and Beckeraths were there?)
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9/10 of what you write about duty is not opposed to the philosophy of Kant. From the remaining tenth the greatest part is not directly opposed. Take the case where a father has hurt his child. You ask: "Does the repentance differ in essence, from any other pain that he may feel?" You are right to exhibit the problem in the form of a question, for it can be solved - - here we agree - - only by experience and wholly be solved only by the own experience. I have no children and own experience is not possible for me. (*) But, nevertheless, I am inclined to agree with those psychologists who assert that the repentance you explain is not only in degree but also in kind another one than repentance for other acts that originally are not in our nature. But that does not refute your opinion, which - - excuse me - - in this case is, probably, also not founded on the own experience.
(*) (J.Z.: I have always found him very kind, concerned and understanding about children, much more than I was, and, perhaps, still am, although I had 3 boys and spent much - not enough - time with them. - J.Z, 13.1.03.)
The love of offspring is not less in animals which do not live in herds (gorillas, lions and 100 others) than in those which live in herds and, perhaps, in the former it is even stronger. But in our present considerations the remark is not essential.
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You say: It seems that the special name of duty is applied to the cases where love is involved.
I am not sure. It a judge decides a case without sufficiently clarifying the matter and applies a law which originally was not intended for cases like the one in question, the judge violates his duty. If a judge is overburdened or must deliberate in a room where the water freezes, that is hardly to be avoided. Sentences of price-control authorities are very often of this kind. Example: A merchant is charged to procure a wireless set. He procures it after much trouble and some prolonged searching for a price of 1,000 paper-marks. The official maximum price is 100 paper marks. He sells the apparatus to his customer for 1100 paper marks, which is really a very moderate price, leaving him not more than 10 %. The customer pays for the for the apparatus, then denounces the trader at the price office and demands the restitution of 1,000 paper marks. The judge looks at the price-control list and condemns the merchant. But the appeals court says: The law says nothing about the lawfulness of compensating a merchant for additional efforts and expenses. Therefore, a price of 1100 paper marks cannot be considered as unlawful under the explained circumstances. The judge of the price-control office had not taken that into due consideration. (The later price-control laws excluded calculation on the here hinted at basis.) Now the customer gets a second bill:
1 wireless at 100 paper marks.
Travelling, to procure it: 1,000 paper marks.
Sum due, and already paid - 1,100 paper marks.
Now the matter was in order. The judge of the first instance had violated his duty, but love was not involved here.
(B. mentioned to me another and quite typical case of these times: Sugar was price-controlled at, say, 20 marks a bag, but bags were not on the list of price controlled items. So the sugar itself was sold for 20 marks and the bag, in which it came, for 200 marks. That was on the official market. On the unofficial one, naturally, not attention was paid to the controlled prices. - From India robberies of grain transports were reported, where the robbers paid the owners the official controlled price - and saved them further transport costs! By the Indian law of that time these robbers could not be charged with robbery! Some laws confirm the popular saying: "The law is an ass!" - Under rent controls and for many years in France more houses collapsed every year than were newly built. - J.Z., 12.1.03.)
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(A list of 100 cases as the one cited would be a good propaganda reference against all kinds of price control laws.)
Sometimes one must be distinguished between "repentance" and "regret". It you spoke inadvertently rather harshly to your sweet-heart (note: birth class of 1882 and a sweetheart!) --- you certainly regret it but you cannot repent it, because you spoke inadvertently and it was a the moment not in your power to speak otherwise. A man is only responsible for what is in his power. (The sweetheart did burn the coffee beans. Every man in such a case would express his opinion in a somewhat forceful manner, according to the nature of men. It is the sweetheart's role to repent and the sweetheart should remember that feelings towards a sweetheart may vary.
"Die Liebe geht durch den Magen" is an old German saying. (Love goes through the stomach.)
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Very faithfully yours - signed: Ulrich von Beckerath.
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U. v. Beckerath, 27. II. 1949.
Your letter of 22. II.
Dear Mr Meulen,
your discovery that typified tickets not convertible into money but merely into goods or services are legal in Great Britain is the greatest discovery made by any man of our time. The consequences can only be compared with the invention of the cross-bow in early middle-ages or of gun-powder some centuries later, both mortal blows to feudalism, although the full effects appeared - - as far as a historian can judge - - not, earlier than in the 18th century. Of course - - one sentence of the legislator, of three lines, and the tickets are prohibited, in a moment, without more than three dozen persons noticing the harm inflicted thereby on the working class (to which, certainly, not only factory workers belong). But the chance is given and that must be sufficient for the moment.
(Note by J.Z., 12.1.03: George W. Hilton, The Truck System, including a History of the British Truck Acts 1465-1960, Cambridge, W. Heffer & Sons Ltd., 1960, 166 pages, indexed, reprinted 1975 by Greenwood and sold for $ 15, ISBN - 0 - 8371-8130-5 HITS, demonstrated that at least in that sphere of goods warrants and token money parliament was, as usual, prolific with its prohibitions. Nevertheless, to overcome emergencies, quite primitive ways of otherwise paying wages were resorted to again and again. Without this intervention quite satisfactory and sound alternative ways of paying labour would have been competitively developed.
Robert Carnaghan wrote to me recently of 2 instances in England, a few years ago, in which the Bank of England stomped upon monetary freedom experiments. Thus it appears that Meulen was mistaken here, too.)
You will consider it as a defect that the tickets are not convertible into gold, at least at the market price of bullion. But if today any banker would really convert his notes into gold (coins? wire? gold varnish?) at any conditions, in a few days all his gold would be converted. Why? People like gold as a proven security in case of a paper money inflation, the word taken in the sense of 1913, when it not merely meant a rising of prices, wages, taxes, etc. But in practice people have no opportunity to get gold. Merely the jewellers and such people can obtain gold. The "man in the street" is too poor to buy the minimum quantities which the gold dealers sell. But converting notes at a bank, that is an easy and simple expedient to get gold.
(J.Z.: At least that situation has improved since. However, the gold markets are still not quite free and such deals are taxed at least in Australia! Dealings in a self-chosen value standard should never be taxed. That would be like taxing every use of measures like the meter, litre or kilogram. - J.Z., 13.1.03, 22.5.03.)
The bank may try to protect itself by an option clause or a condition by which the minimum amount converted is, say, L 10. And if it is L 100, such a condition is really no protection. The inhabitants of a house or the members of a club will nominate a trustee and get the gold. In the case of an option clause, the notes will be legally presented on notice and converted after 3 months or 6.
The fact that for so many years the people were prevented from acquiring gold as easily as in 1913 cannot be overlooked. The fact has created a quite new situation. Only if gold coins have circulated for some years and people trust that they will continue to do so in the future, may a banker promise to convert his notes into gold under conditions as he may see fit. At such a time the gold clause is then also without practical value because most people will then prefer paper to gold.
If Free Banking is to start in our times, then it must start without gold.
That 40 years ago the experiment of the "Cooperative Brotherhood Bank" failed does not prove the uselessness of Free Banking without gold for our times. Social progress is - - is Kant means it - - a natural process, like the variations of the Earth's poles or the inevitable enlargement of the mouths of great rivers (Mississippi, Nile, Ganges). Free Banking is a part, of this process, and it corresponds to the usual course of natural processes that nature first exhausts the possibilities of failure. Nature creates mammoths and similar beasts before it creates Indian elephants, which are the animal that nature really meant.
Every failure is to be considered as a tiny seed. Nature wants many seeds to create one plant.
Very faithfully yours - signed: U. von Beckerath.
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U. von Beckerath, … 28. II. 1949. Your letter of 9. I., "Bankmaessigkeit" of loans.
Dear Mr. Meulen,
"bankmaessige Sicherheit"- - security fit for banks - - does not mean, according to the elder German theory of banking, a higher degree of security than - - say - - a mortgage offers. It means another kind of security, namely that of the certainty of keeping the quotation of notes at par by the nature of the securities selected. The banker said: If the security is well selected then note holders must not wait, in cases of panics or bad humour in the business world, when, when everybody likes to convert notes against something substantial (which has nothing to do with trust in the banker), or merely a very short time, so that even when the trust politicians, parliaments, generals on similar people sinks to the legally prescribed minimum, the trust in the banker remains unaltered.
Theorists and bankers said: If the bank grants advances in notes on short terms, not exceeding 3 months, and the notes suffer a discount
(1 hour later)
then it is advantageous for the debtors of the bank to buy the notes and repay, with them their debts at once. Example: If the discount on the open market is - - say - - one percent, the debtor buys these notes and repays with them his debt, he wins at once 1 %, which may be more than 10% or even 15 or more % per year. The gain depends on the time between the day of purchasing the notes and the day at which the advance is to be repaid.
If the advance is to be repaid at April 1st, the notes are bought on March 30th and used as means of payment on March 31st, then the gain is 1/99 per day. If the advance is to be repaid on the 1. 5. and, instead, is repaid on March 31st, then the gain is only 1% per month - - still considerable, but not so stimulating as in the former case, for a merchant is often in a situation where he may, by cash turnover, win more than 1$ per month. If the advance is to be repaid on June 30th, then the gain is only 1 % for three months, if the notes were bought on March 31st.
If the advance is to be repaid later then after three months, then the debtor, in the case here considered, is not induced to buy the notes. He would probably lose, although the bank must, in every case accept its own notes at par, even if their quotation at the Exchange may be as low as is economically possible.
It is now to be seen, that the shortness of the time, for which the notes are granted, creates a mechanism to draw notes, which had suffered a discount, quickly from the market and so restore parity.
That characteristics of short-term advances is what German bankers and theorists in old times called "bankmaessige Sicherheit".
Very faithfully Yours - signed: U. v. Beckerath.
If parity is restored, then the note-holder can buy in every shop anything and use the notes as means of payment at par.
The trust in the banker is restored. The note holder may then even change the notes into other means of payment, say, coins or notes of other banks, without loss.
Bth.
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3. III. 1949.
Dear Mr. Meulen,
from an excellent German book, "Die Banken", by Huebner, published some years before 1860 (burnt with 3,000 others) (Otto Huebner, Die Banken, 1854, 476 pages, was reproduced in PEACE PLANS 566, 42 times reduced. - J.Z., 13.1.03.) I learnt that the law of 1844, though a hard blow for Great Britain's economy, did hardly effect the profits of the note-issuing banks. As one of the reasons for this astonishing fact Huebner points out: The interest rate for advances given by bankers to merchants, in their own notes (they distinguished between advances in the own notes and advances given in notes of the Bank of England, which cost considerably more) was very low, so that it left only a very small profit to the banker. Thus giving up this branch was hardly a loss to the banker. Long before 1844, as Huebner reports, the bankers got the main part of their profits from their deposit business. This business was considerable because, at this time, there were very few opportunities for the public to invest small sums for some weeks or months, except with the bankers. The deposits enabled the bankers to grant advances for a longer time than a bank could have safely granted only by issuing its own notes.
Although this matter is not immeciately connnected with our theme, I beg to observe here, that the manner in which the advances were granted, was very prudent. By the way, it was the same manner in which the old Prussian public fire societies paid the indemnities to those insured who suffered a loss. Not the merchant who applied for the advance got the money but his creditors got it. By this simple procedure the bankers get a very good insight into the business of the merchant and learnt, without an inquiry-office, whether the merchant was creditworthy or not.
Moreover, it often happened that the creditor was a debtor of the banker. In this case the banker was often in the situation to simply credit, to the merchant's creditor, who was the banker's debtor, the amount advanced.
I was not able to get details about the deposit-business of old Scotch and English banking. But I do think it probably that some persons deposited sums with recall terms of some years. (Fixed deposits. - J.Z.) The interest on such deposits may have been relatively high. Probably it was as it is now with banks in Switzerland. For short-term deposits they pay no interest or even charge an administration fee. For long-term deposits they pay nearly the same interest as mortgage bonds yield. With the money from such long-term deposits, the bankers very probably financed the supply of machines, raw materials and other goods which do bring profits but not at once. But to the public it seemed as if the banker financed such purchasing simply by issuing notes and my impression is that even Adam Smith did not have the full insight here. But he is to be excused, for bankers at that time liked to hide the details of their business and veil it in secrecy and even mystery, as we ourselves would, probably, have done, if we would have lived at that time. (The Prussian State Bank published no reports from 1807 until about 1850.)
The historian, who would collect the certainly still available details, of old deposit business, would do a great service not only to history but also to modern monetary theory.
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Very truly yours - signed: U. v. Beckerath.
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4. III. 1949.
Dear Mr. Meulen,
in the Berlin newspaper "Die Welt" I read this news:
"Illegal coining. The manufacturing of imitations of British sovereigns and American gold-eagles is reported from two countries in the West of Europe. The imitations are indistinguishable from genuine coins and are of the same standard. At the bullion market the coins are paid for at double their nominal value.
The coins, which some medal factory will have fabricated, are, obviously, no falsifications. They are merely imitations, and the crime, if there is a crime, consists in a violation of the mint monopoly of the governments. But a lawyer may ask if such a monopoly can still be admitted after England and the US gave up the gold standard and, consequently, the coining. Coins are today nothing more than ingots and for the manufacturing of ingots no monopoly exists. However, may the lawyers decide the question.
More important is that the information reports a market value of the new coins far higher than the quotation for ingots at the bullion exchange. The ingots usually sold by the gold dealers are relatively big and can only be bought by jewellers, dentists and other people, who are rich enough to buy them. The demand of the man in the street, although always latent, did not appear at the market. Now just this demand is partly satisfied by an offer. Experience shows now that the public is willing to pay, e.g. for an ounce, not 35 Dollars, which is the legal purchasing price of the government in the US, also not 48 Dollars, which is the price at the bullion market at Mexico City, but 70 Dollars, if the information of "Die Welt" is right, and I believe it to be right. But the latter price will not be quoted officially, because the selling of the newly minted coins will by considered as illegal by the governments. Consequently: A banker, who offers to note-bearers redemption in gold at the quoted market price of bullion will have lost all his gold in a short time. In the case where the banker offers gold coins, the matter is particularly clear. The note-bearer presents 480 Dollars for redemption, gets 10 ounces, then he exchanges the ingots (perhaps in form of wire, as not seldom in China, or in form of gold varnish, as happened often in Germany in 1923) at a free bullion market, with a little loss into gold coins of the new minting. With the new gold coins he buys notes, represents the notes - - at a greater quantity than before - - again to the banker, and in a few days or earlier, the banker will have lost all his gold.
This process presupposes that the price difference of ingots in the usual form and that of the newly minted coins - - if exchanged in natura - - will not be great.
But it may also happen that the existence of the newly minted coins at the bullion market elevates the price of ingots to the present price of gold coins at the bullion market. Then the banker can pay a smaller quantity of gold than would be the case without the existence of coins at the bullion market. But then, as well, the public, in its present thirst for bullion gold, will demand the redeeming of the notes. The time before the last gold is used for redemption purposes will now not be 3 days but, perhaps, three weeks or even three months, but, very probably, not longer.
The new coins created a new reason for not starting Free Banking with a promise to redeem the notes in any form of gold.
Very truly yours - signed: U. v. Beckerath.
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5. III. 1949.
Dear Mr. Meulen,
in Germany it was an old practice, of the large note-issuing banks, to collect as many notes as possible of the smaller note-issuing banks and then to present them for redemption. (The worst in this respect was the Prussian State Bank.) The laws, 2 or 3 generations ago, fixed an upper limit, for the amount of outstanding notes, in multiples of the silver or gold-coins. Suppose, the bank had a amount of 1 million Silver-Thalers, then it was permitted to issue three million in notes. (The ration of one to three was considered as "classical" and "approved by the experience in England". The rules of some banks had fixed a ratio of 1:2 or 1: 2 1/2.) Now the Prussian State Bank (1876 transformed into the Reichsbank) undertook sometime this funny business: It collected notes of the bank, say, for 500,000 Silver-Thalers. Then it presented this parcel for redemption. The bank must - - of course - - redeem and lost 500,000 Thalers in one day. Then the Prussian Bank demanded that the bank must, at once, reduce the amount of its outstanding notes to the threefold of the remaining silver stock, that is, by 1 1/2 million Thalers. The bank was unable to reduce the amount of its outstanding notes as quickly. Thus it must apply to the ministry and beg for a respite. The respite was nearly always granted, for the ministry was not the blockheaded not to see, what the calling-in of more than a million notes meant economically. But the Prussian Bank would then publish, in all papers, that this bank did no longer deserve trust, for its silver-stock was reduced to a lower amount than the law permitted. Banking at that time was no pleasure and after 1876 (the year when the Reichsbank began its business) the 33 then existing note-issuing banks gave up their privilege without much resistance, except four. The banks turned to deposit business, which brought greater profits and was not exposed to troubles like the ones mentioned.
The Prussian State Bank itself had learnt something from its evil practice. In the new banking law, by which the Reichsbank was created, there was a provision that the bank could issue as many notes as it believed it could responsibly issue, but it must pay a tax of 5 % p.a. on the amount not covered by metal stock, the threefold of the metal stock being considered as "normal". That law was generally admired by the economists of that time and imitated by some legislation. (It is said, that Michaelis first suggested the idea.)
I am afraid that note-issuing bankers - - if they would promise redemption of notes into gold - - even today, would be exposed to attacks as were the old note-issuing banks in Germany, 90 years ago. The precaution of the banker consisting in substituting notes of other well established banks for gold would not protect the banker. The man who claims redemption need do nothing ore than declare: I do not trust the other banks and do not consider them as being well established.
The redemption idea, which brought so many calamities to the world, must be completely rejected for the note-issuing business.
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Very truly yours - signed U. v. Beckerath.
(The "gold-bugs" would, naturally, object that only the fractional gold reserve fund, combined with the full redemption obligation, by the issuer, at any time, upon demand, ought to be rejected, as far too risky and replaced by a 100 % gold-covered and 100% gold-redeemable gold certificate issues. But then most of the advantages of free note issues would disappear and only the advantages of gold certificates over gold coins would remain or, nowadays, those of being able to convey electronically the value of really existing metallic gold weight units, stored at some centre. All transactions would still, essentially, be confined to barter transactions against weight units of metallic gold, that are actually in possession of or claimable by one of the traders. In other words: All the millions of goods and services ready for sale, could only be exchanged through the bottleneck of a single commodity, one that is rather rare. - If one sufficiently ponders that imposition on all exchanges, one will soon see its absurdity. Moreover, all clearing does, obviously, not require the presence of metallic gold weight units at all, but merely accounting in them (if that value standard is chosen for this purpose) and knowledge of their value on a free gold market. Thus, all people able and willing to clear their exchanges, even when they do so with the aid of notes, certificates or accounts, should not be obliged to have at their disposal equivalent amounts of metallic gold. A. can clear the value of 1,000 ounces of gold that he owes to B., on a certain day, against the value of 1,000 ounces of gold that B. owes to him, on that day, without a single ounce of gold being in the possession or claimable by either a A. or B., or being required for this mutual cancellation of debts, or being moved from its present location in the world to any other location. No right to metallic gold need be involved at all, although ounces or grams of gold may still be the value standards in the contracts or claims exchanged or settled between A. and B. - or a multitude of participants. - J.Z., 13.1.03.)
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U. von Beckerath, 6. III. 1949
MONETARY EXPERIENCE AT POTSDAM.
To understand the following report of the West-Berlin "Der Tagesspiegel", edition of 26.II.1949, one must know:
I.) that the Russians opened some months ago, in the in zone occuplied by the Soviets, a number of shops where rationed goods are sold freely and where the price control rules are not applied. It is said that the business of these shops does help considerably to diminish the Eastern Zone's deficit. To tell the truth, the quality of the goods is not worse than those of the rationed goods and often better. The prices in most cases do not surpass the prices at the secret (black or underground - J.Z.) markets.
II.) There exists a regulation in the Eastern Zone that no private person is permitted to keep at home more than 600 East Marks in cash. The report has been:
"Some days ago an inhabitant of Potsdam bought, for 2,000 EM a wireless set at a State shop situated in the Brandenburg Street. The cashier-lady demanded the buyer's address and added that all people buying for more than 1,000 EM must state their address upon order of the Soviety Military Administration (SMA).
Three days later, there appeared at the buyer's home two officials and demanded, in the name of the SMA, information about the provenance (orgin - J.Z.) of the 2,000 EM. He must know that he had no permission to keep at home more than 600 EM in cash. Then they confiscated the wireless set. The buyer protested at the State shop. The manager counselled him to keep quiet. The case reported is the fourth of this kind observed."
On first impression, one is tempted to ascribe such occurrances simply to the wickedness of a part of the government's officials, a natural product of the atmosphere of continual rape and deception, unseparable from the activity of a government daily and every hour violating man's most natural rights. But the true reason is that such occurrances do happen, and, as it seems, become more frequent every day, lies deeper.
(J.Z.: Compare the forfeiture laws and practices of our time, in which, under the pretence that they would all be associated with outlawed activities, large quantities of cash and other assets are simply confiscated, without a warrant, a court hearing, a sentence and without, in most cases, any opportunity to recover these officially stolen funds and goods. In that respect we have arrived as the Soviet state of affairs! - J.Z., 13.1.03.)
In Russia and, consequently, in all countries under the influence of the Soviets, but also in the minds of most socialists in the whole world, the opinion prevails that the relative freedom in the capitalistic countries is in itself a capitalistic product, essentially restricted to the capitalistic classes. The bad situation of the proletarians is ascribed to the misuse of that freedom by the "ruling classes". (Workers in Russia and many other countries do not know that in England and in the US the workers themselves distinguish sharply between "workers" and "proletarians". Therefore, the authors of the celebrated "Communist Manifesto", published 1847, wrote in sincere conviction:
"May the ruling classes tremble before a communist revolution. The proletarians have nothing to lose than their chains. They have a world to win. Proletarians of all countries, unite!"
The authors (Marx and Engels) were honest enough not to promise the proletarians more freedom than they possessed, but merely more wealth.
Very few men, such as Bastiat, 100 years ago, Benjamin R. Tucker, a generation later and, in our days, the editor of THE INDIVIDUALIST, called the workers' attention to the fact that their freedom is by no means zero but great, although not great enough and seems only to be zero because it is not understood by the workers. They appealed to the workers not to abolish their freedom but to extend it and to claim and exercise all liberties that are until now the privileges of the "ruling classes, managers of Central Banks included, and not to forget the most important liberty, that is, to provide, by means of Free Banking, their own means of payment.
Expressed in other words: They should become independent of the good will and the "economic prudence" of the managers of central banks, likewise of the prevailing monetary theories and also of the hoarding of money by the public.
Few of the contemporaries of Bastiat and Tucker fully understood them. The working classes took no cognizance of their writings. To the extent that they took part in the political and economic activities of their times, the greater part of them followed Marx and Engels, on a path which, inevitably and immediatelky led to the State (or state of affairs? - J.Z.) now prevailing in the East and producing the reported events.
Marx had the great propagandist advantage to start from popular opinions that are not the result of reflection but of the lack of it and, therefore, are equally to be found in the mind of the masses and of intellectuals of all times and peoples. (Take the number 10 of the demands in the German edition of the Communist Manifesto of 1848:
"All private banks are replaced by a State Bank, whose notes are legal tender. By this measure it is possible to organize the credit in the interest of the whole people and by this the supremacy of the great money lords is undermined. By gradually replacing gold and silver by paper money, the indispensable instrument of internal exchanges is cheapened and thus the opportunity is provided to use gold and silver abroad. Finally, the measure is necessary to bind the interests of the conservative middle classes to the interests of the government."
To frame such a programme, obviously no meditation is required. In his work "Critique of Political Economy", published 1859, Marx does not treat money as a means of social revolution.)
One of the popular opinions from which Marx started was:
"The supply of the economy with means of payment must either be the affair of the government itself or must, at least, be controlled by the government in the most severe manner - - an error hardly less disastrous than the medieval error, that the Heaven punishes the country which leaves heretics unburnt.
If the government or its authorized bank have the monopoly for creating money or putting it into circulation, then hoarding of money is obviously a crime and a very severe one. Under such suppositions it seems quite logical that the government tries to prevent hoarding as effectively as possible. Considering the matter from this point of view, it was also logical that the Supreme Economic Authority of the Eastern Zone ("German Economic Committee", DWK) restricted the amount of cash, which an individual may legally possess, to 600 Eastmarks.
Taking further into consideration, that the greatest part of the working class in the Eastern Zone earns less than 200 EM monthly, the amount of 600 EM seems even liberally proportioned.
Moreover: If the view on the legitimacy of "exclusive currency" (excellent expression of W. B. Greene) is admitted, then the government can hardly be blamed if it enforces the circulation of cash money by all expedients in its power, however they violate the principles of morality, as was the case at Potsdam.
"The welfare of the working class" (to which a continued and sufficient supply with cash does certainly belong) is the first moral principle of State socialism.
"Lack of cash money is the greatest evil which the working class may suffer under" is a second principle and here State socialism and all others do agree.
"For the government and all faithful subjects, it is a right and a duty bring money-hoarders to the punishment they deserve and to treat them as if they had stolen the hoarded money from the working class", is another principle of the socialist State. If follows quite logically from the former.
If one considers, that such principles are not infrequently published in the Eastern press, further, that these principles do essentially agree with the principles of State socialism in all countries, so that the "man in the street" finds no difficulty to believe in them, and further: That only Free Banking Theories - - unknown, of course, in the Eastern Zone - - supplies arguments to objectively and thoroughly criticize the underlying monetary principle, then the officials of the store at Potsdam seem excused. Very probably their conscience was quiet. But to the reader of this little story it must be a hint.
The restriction of the amount of money which a private person may legally possess - - and the methods to enforce the laws about the restriction - - are the last and inevitable consequence of the modern monetary theory and practice. Eastern State Socialists had the courage to enact laws corresponding to their hypotheses. One day Western countries will follow and must follow, if they do not prefer to give the Free Banking principle and practice a chance. And all suppression of personal and political liberty is then also inevitable in the West as it has been in the East. For monetary freedom is the preliminary condition of all other liberties - - a theorem easily to be derived from history, although - - as it seems - - not yet applied as leading principle by our historians.
U. v. Beckerath, 6.III.1949.
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U.v. Beckerath, 12. III. 1949 Your letter of 9. III., received today.
Dear Mr. Meulen,
to enter into as many details as possible in all that concerns Free Banking, I consider to be my duty and to discuss the matter with the man more trained in Free Banking thoughts than any other among our contemporaries, is an honour and, by the way in which he discussed it, it is a pleasure. Therefore, I too will deal with the banking discussion first.
(B. always tended to "butter up" his discussion partners to put them into a more receptive frame of mind. People happen to prefer compliment to insults, no matter how little deserved the former may be and how much the latter may still be under-stated. He often quoted the Arab saying: "With a spoon full of honey you catch more flies than with a bucket full of vinegar!" - Nevertheless, he was so much ahead, in most cases, of his correspondents or discussion partners, that only few were able to fully follow his line of thinking, check it out and adopt it, to the extent that it was correct. To be able to do so, at least to some extent, when I visited him in the evening, often exhausted from work and a long trip across Berlin, the first thing he did, to prop up my mind, was to present me with a mug of steaming and very strong coffee. That perked me up and I became, temporarily, a somewhat worthwhile listener, questioner and objector. But the flow of information was mostly rather one-sided, from him to me. - I wish he could have conducted the kind of seminars among highly intelligent and interested students that were at the disposal of many of the other libertarian great thinkers. Well, he did the best he could - with the limited "material" he had on hand, or through correspondence and a few public meetings. I suppose, that he would be very well known by now if he had had the Internet at his disposal, or many pages in a periodical. - J.Z., 13.1.03.)
Market price of gold metal.
Is it not so in London, that at the same time always two bullion prices are quoted - - a price for sellers and a price for buyers? If it is so, then the banker is not able to buy the metal at the same price at which he sells it to his customers.
Further: Perhaps at the bullion market there is a similar usage as at the stock exchanges in the US and in Germany and, probably at others: After each settling of an order of a buyer, the broker raises the price for the next sale by 1/8th % of the nominal value, and after each settling of an order of a seller he lowers the price for the next sale by 1/8th % of the nominal value. I heard from a banker that it is, very difficult and impossible - without some good luck - to buy a thing quoted at the exchange at the same price for which it was sold. In Germany the thing would still be complicated by the exchange tax (Boersen-Umsatz-Steuer). For every sale a tax must be paid - - I forgot the amount - - and by this tax it would be impossible to buy a thing for the same price as the price for which it was sold, even if there were no difference between seeking price and buying price, and the market price would remain unchanged.
But I will not deny the possibility for a well trained banker to reduce the here mentioned charges to a tolerable amount. Yet I am interested in the way how he reduces them.
You say: Gold is required only when mutual trust is lacking.
In an excellent article in the daily "Der Tagesspiegel" of 22. I. 49, Professor Rittershausen points out, that at the moment the lack of trust is greatest in all that is to be expected' from governments. He reminds the reader of the numerous attacks on the savers' money during the last 6 months, e.g. by compelling the money-owners to bring
his money to a bank, then blocking the account, to replace the money unit by another, a tent in nominal value, and such things of "despotism", as at the time of the German kings, dukes, etc would have been considered as impos-sible. (Heading of the article: "The bee-folk of the savers." - "Das Bienenvolk der Sparer.")
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(Note by J.Z., 13.1.02: The arbitrarily fixed reduction rate in the denomination was only one of the arbitrary features of this "currency reform" but not its worst. E.g., the note issue monopoly and legal tender, i.e., compulsory acceptance and compulsory value, were continued. Moreover, quotas were prescribed for the per-head amounts that people could exchange of the old money for the new money. The official excuse was that the money of speculators, black marketeers and thieves etc. would not be exchanged. As if everyone possessing more of the old money or money claims, than the prescribed quote for him or her, had acquired it dishonestly. Old RM claims, from before the Nazi's inflation, and the subsequent once by the occupation forces, were also reduced at same rate. Thus, for instance, a trust account, towards my further education, that my mother had built up, under great personal sacrifices, over many years, from a very modest salary, was reduced to one tenth as well, although at least her initial contributions to it had a much higher purchasing power. Not that the second "great" currency reform in Germany, that after its re-unification, was any more rightful and sensible. The presently recognized "experts" seem to know nothing about such a rightful and rational currency reform, one in accordance with free market principles and economic rights of individuals and simple honesty and fair play. - As for the above-mentioned article, supposedly by Prof. Heinrich Rittershausen, his second wife told me, after he already had a severe stroke, that this was the one and only article on such matters that she had ever written and got published. To facilitate its publication, it was published under her husband's name, who, at that time, had to support himself and his family as a freelance journalist. As far as I know, she got her economics education largely by typing and re-typing and editing the numerous book manuscripts and articles of Prof. Rittershausen and by being present in many discussions with his friends. - One of R.'s daughters had studied "economics" at one of the post-WW II German universities - but, perhaps because of this, showed no interest in and appreciation of her father's writings. Such is life, all too often. - J.Z., 13.1.03.)
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I admit that things are different if the banker has the right to redeem notes, presented to him for redemption, in notes of other banks, considered by the banker and the note-bearer as well-established. In every case notes of the Bank of England would be such notes, also treasury notes. If the banker possesses as many notes as he wants for redemption, in every economically possible case, and the public believes that the banker is so well provided, then the cases, when notes are presented for redemption, will probably be rare and, in every case, tolerable. I do also admit that it would not be required to possess the notes. An agreement with the Bank of England or another
well - established bank, whose quality cannot be denied, to furnish the notes, when required, would be sufficient, An option clause would help considerably to diminish the risk for the banker.
Will the banker always be in a situation to get enough notes? It does not seem to me to be so self-evident. But my objection is the following:
The supply of the people with typified means of payment should not depend of the willingness of rich people to play the role of a banker. And you will admit that a banker, who will issue notes, by your system, must be very rich, his capital (perhaps borrowed, perhaps his own, perhaps partly borrowed and partly his own) required not being less than the amount of his outstanding notes or a very high percentage of this amount.
Now take countries like India, China, Germany, Poland, Italy and many others. It is not probable that, in these countries, can be found enough rich men to become bankers or to lend to bankers.
The first who create note-issuing banks, will be "intellectuals", authors, intelligent workers or artisans, people who read your book, store-keepers, lawyers and such people. Such people should not be prohibited from creating a note-issuing bank, although they do not possess capital and are not able to borrow capital.
Also, in the mentioned, countries in the months or years after the first establishment of note-issuing banks, neither gold nor notes of acknowledged well-established banks will be obtainable. Nevertheless, Free Banking should be introduced and better today than tomorrow. For countries like England and the US, it may be possible that note-issuing banks, working on the lines of your system, are a severe competition to banks which do not oblige themselves to redeem their notes. - - Perhaps - - but I am not convinced of it. At least in villages and in small towns, banks without redemption and, especially those on a mutual basis, will do their business. That is my opinion, which I cannot prove, the object being a future thing, and I am no prophet. But from the monetary history of the United States I learned that note-issuing banks in small towns were sometimes protected by the people against persons who tried to embarrass the bank by presenting notes for redemption.
The people simply cudgelled them. The inhabitants of the small towns were so well informed that they saw: Note-issuing needs no redemption to function well.
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What you say: "People will not accept … notes … if there are too few shops where they can spend them" is right. If the community, where the note-issuing institute will operate, does not find men, able to bring together enough shops, where the notes are accepted then the note-issuing will not be possible, however needed it is.
It is, a similar situation as with bread. If no bakers exist in the community (and households do not bake their own! - J.Z.. 13.1.03.) then the community must do without bread, no matter how much they want it. (Now they can "import" it from the nearest shopping centres or it will be automatically delivered to them, by baker's trucks from larger settlements, upon their standing orders. - J.Z., 13.1.03.)
For a country like India, I estimate that a time of about 30 years will still pass before 3/4 of all its communities, which want a note-issuing institute, will get one. For Germany, I estimate that the time will be 10 years, perhaps even only 6 to 7 years.
(J.Z.: If the issuing technique were made sufficiently known and contrary laws were repealed or could safely be ignored, then the introduction of free banking could be very fast. But that is a VERY great IF! - J.Z., 13.1.03.)
The methods by, which a bank on "my" system (it does not belong to me) ("can be established" - seems to have been omitted here! - J.Z., 13.1.03.) are not so tedious. In times of depression the tradesmen and the storekeepers beg to participate. The agreement, in such times, can be reached in a few minutes, as is reported in a very interesting article in the journal "Sound Currency", published at New York (I had the volumes of 1895 & 1896) by John DeWitt Warner, "The Currency Famine of 1893", where the notes were called "Clearinghouse Certificates" and the institutions simply clearinghouses, to accommodate the bad American paper-money legislation, which since the tine of Warner has become still worse. But that should not hinder Americans to be very proud of it and to recommend its imitation.
("Here lies" - he should have added - J.Z.) (One of the many causes for which Chiang Kai Shek's China lost the war.)
So much for today.
Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, …….. 15. III. 1949. Your letter of 9. III.
Dear Mr. Meulen,
if a banker, who desires to attract customers by promising redemption of his notes into gold, promises only 90% of the market price, very probably the customers will be satisfied. In 1844 they would not have been. At that time gold coins circulated. But today they have disappeared and a great part of now living men never saw a gold coin. A redemption provision "90% of the market price" would remove the difficulties I pointed out and would restrain the cases, where customers demand redemption to the cases where:
1.) a real distrust against the banker arises,
2.) the customer finds himself in a situation, where he cannot use the notes as means of payment. Tax offices, railways, many landlords and foreign merchants probably would not accept notes of a private bank.
My objections are less the technical difficulties. But I think, exchange should not depend upon the wealth of some rich men or the good luck that the bullion market is in order, if it is possible to attain a complete independence of exchange from the wealth of bankers or the real stock of gold at hand.
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I must confess that I do not comprehend the connection between the action of a clearinghouse and the time for which the note-issuing bank lends out its notes. I understand that under the redemption system the clearinghouse detects in a very short time whether the bank possesses enough means to redeem its notes as promised. But how should the clearinghouse find out, if a note-issuing bank does business which should be reserved to mortgage banks and similar banking institutes? Perhaps it is explained in your book. But since 1939 I had no possibility to look at it. In that year, I had to accept a situation which left me no time to read books, and on the 22nd of November 1943 your book burnt together with 3,000 others.
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(J.Z.: For once I must side here with Meulen, on a technical aspect of free banking: If other banks had, likewise, confined themselves to liquidifying with their notes only sound and short term claims, arising out of goods already produced and sold, then there should not be many more notes of their own issues in the hands of other sound bankers, than they received themselves of the notes of these other sound bankers. The notes would be exchanged and, roughly, balance each other in their totals. Still unsettled small differences might be largely settled with the next note exchange. Sometimes the once side, then the other, would have a small surplus of notes of the other banks. Each would, so to speak, buy back the own stray notes, quite frequently, if not daily, with the stray notes received from others. Knowing this, they would, mostly, not hesitate at all to accept at par the notes of other sound note-issuing banks. But if a bank over-issued its notes, e.g., by granting long-term loans directly with them, i.e., without involving savings and fixed deposits of their customers or the sale of bank bonds, then the other sound banks would, every day, receive more notes from this unsound bank than the unsound bank can offer notes from sound banks in exchange. That would soon lead to a discount of the notes of the unsound bank by the sound banks and also rapidly to many refusals to accept them at all. If the note exchange is daily then, I believe, Meulen was right when he stated, somewhere, that the clearing house, at least that department of it which mediated the exchange of "stray notes" between the banks of issue, would be among the first (apart from those working in the unsound bank) to notice an over-issue. On the first day there would only be a suspicion that an over-issue might have occurred. But if the un-exchangeable surplus of notes from the unsound bank would go on for a few days, then this suspicion would turn into conviction about what has happened at the unsound bank. So much seems obvious to me, as it appeared to be also to Meulen. - I do not know why Beckerath did not apply his usual comprehension of the free-market rating of notes to the extensive traffic or exchange of notes between note-issuing banks. Only the general exchange for currencies would be in a similar position as an observer, recorder and publiciser of what is happening with the influx and reflux of private notes and would, similarly, express it with discounts and refusals to accept. - J.Z., 13.1.03.)
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I consider the issuing of notes first of all from the standpoint of the workers, employed by an employer or organized in cooperatives, who must every week get the means of payment to buy food etc. To supply the workers with means of payment, accepted in stores, should be possible even if no rich men are willing to undertake such a business and if the bullion-market is closed or does not function, for other reasons.
In Germany the greatest danger would be the stupidity of the authorities. The authorities are now in many towns again controlled by nazis - formerly organized in the party and others (Tannenbergbund and the 100 little unions still crazier than the Hitlerians). Their mentality is:
The use of gold for commercial purposes is a Jewish invention. And all what is Jewish must be prohibited. At first close the gold market! This mentality is by no means restricted to Germany!
(A problem for philosophers: Why is the world so organised that the crazy are always in power and the men of knowledge and logical thinking must obey them? The short interruption of this normal state in the 19th century should not deceive us about what is really normal in history. The Neros, the Pierre d'Amiens, the Svonarola, the Hitler and such people are always the leaders. You and I obey.)
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Very truly yours - signed: Bth.
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(J.Z.: By then B. had probably not yet been able to read Hayek's chapter on Why the Worst Get to the Top, in "The Road to Serfdom." But at least he should have pointed out here, that the more enlightened, as well as the even less enlightened, are not free to opt out and to do, afterwards, in their own panarchies, their own things for or to themselves, thus getting rid, as far as their own affairs are concerned, of supposedly "great" and popular leaders and their systems. Then only the stupid would have to suffer directly and soon under the stupidities of their leaders, while they would always have right around themselves the successful examples of better systems and would remain free to choose one of them for themselves.
Moreover, the "enlightened" were never yet enlightened enough to provide a proper market for their ideas and their services or talents. Directly, they can, obviously, play only a small role in the mass market. But as guardians and practitioner of the best ideas and talents, combined in a special market, they could greatly influence not only their own affairs for the better but also the affairs of everyone else. For all who would seek solutions to remaining problems would, sooner or later, have to come to them, the only ones who could then offer them, to the extent that they do already exist and have been proven correct. As it is, not even the over 100 libertarian think tanks have so far sufficiently combined and made accessible whatever truths, ideas, opinions, facts, platforms, references and talents they have to offer between them. - J.Z., 13.1.03.
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U. v. Beckerath, … 17. III. 1949. Your letter of 9. III. 49.
Dear Mr. Meulen,
yes - - in the sense in which you use the word "absolute duty", there is no such duty, especially for people who possess no sense for duty, and such people do exist. You and I met them. Every being will act according to its nature. "Knowi Sayton", "recognise yourself" (Know yourself! - ? - J.Z.), is what every one of us wants. But sometimes one does not recognize oneself thoroughly enough. Tiberius, in the last years of his life, was haunted by the ghosts of those he had murdered. (Seeing ghosts means day-drams, as Schopenhauer, in his dissertation on ghosts explained, but this theory is here not interesting.) Suetonius, in his biography of Tiberius, reproduces some letters of T. to the senate, in which he confesses his guilt and the being haunted by ghosts. Tiberius did not know himself enough and did not know that there was more moral sense in him than he believed, when he tortured his friends and others to death.
Nearly the same happened to Theoderic, king of the Ostrogoths. He had murdered his friends and advisors Boethius and Symmachus, in a very cruel manner. But at the end of his life he was, like Tiberius, haunted by the ghosts of the murdered. At a banquet a great fish before him seemed to take the figure of Symmachus and looked at him angrily. The king was so frightened that he had to interrupt the banquet. Gibbon gives details. Theoderic, too, was more just then he believed himself to be.
Genghis Khan had killed about 50 million men. The priest of the Mongols had "revealed" to him, that it must be his "duty" to transform Asia into a pasturage. But at the end of his life he repented his cruelties and promised to rebuild the destroyed towns (which he - - of course - - never did.) He had believed himself a Mongol of average moral disposition, but he was a man of a better nature, but experienced it too late.
Dostoievsky paints, in some of his writings, men who believe that no moral restrictions would exist for them. But they knew themselves not well enough. Raskolnikow breaks down after having committed a robbery with murder. Another, whose name I forgot, who had violated a girl of 12 years, sees, at last, the girl constantly before him, lice a spectre. He did not know that such acts were not in his nature, but he knew it when it was too late.
Pirogow, a celebrated Russian physician, vivisected many hundreds or thousands of animals, with all the cruelty of vivisectors at his time. But in the last years of his life the spectres of animals appeared to him. Though he - - as a scientist - - knew, that there are no spectres, the impression was deep and he expressed in his writings repentance and said himself: I did not know that vivisection was not in my nature.
These are extreme cases, and it may be very rare that the true nature of a man, who acted against his nature, reveals himself by the apparition of spectres.
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Was Attila a man without a sense of duty? Perhaps, perhaps not. I guess that he felt a strong sense of duty towards his Huns, although not towards other men. In nomad tribes this mentality is often found.
Scientists like Darwin and others say: In the struggle of life those tribes had the best chance among whom there lived the greatest number of individuals with a sense of duty, even if this duty may have been a purely military one. In the early fight of men against mammoth and Ichtyosaurus, men were needed who came to the help of their fellows without regard to their own danger. They must have felt the duty to act so and, very probably, 100,000 years ago such men were numerous.
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I agree with what you said in the last section of your letter. Rousseau said, that a country with more than 4 million inhabitants could not be well governed, simply because a government cannot oversee the affairs of more than 4 million men. The US are better governed than almost all others. Many of the States do not posses more than 4 million inhabitants.
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I must close. Cold fingers!!
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Very sincerely Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 18. III. 1949.
Dear Mr. Meulen,
exchange may be subdivided into:
I.) exchange of present goods against other present goods,
II.) exchange of present goods against future goods,
III.) exchange of future goods against other future goods.
It there are present goods but not yet sold or whose economic situation such that their sale is not certain (jewellery, paintings), then, economically, they must be considered as future goods.
Exchange of presently available goods against other ready for sale goods does not require capital, but merely a clearing in any form.
'Exchange of presently available goods against other goods, not presently available, requires capital, the own or borrowed, whether the goods are future goods or goods that are already in existence but are still to be sold and whose sale is not certain (jewellery, paintings).
Exchange of future goods against other future goods requires at present neither clearing nor capital but only mediation.
I.) is the domain of note-issuing banks. They clear victuals against labour, barber service against cobbler service.
II.) is the domain of mortgage banks or commercial banks and of every one who possesses capital in suitable
form and is willing to risk it.
III.) has at the moment no great practical significance, but will one day be a great business. To sell production in
advance for a long period, say, some years, will diminish commercial crises and restrict production and
selling for the market. Of course, the market will never be wholly eliminated. (Especially not for goods and
services that are in regular and daily demand. - J.Z., 14.1.03.)
Here I do not consider case III.), where the dates of exchange differ. That case (III a) is, economically, not different from case II.).
Some say: Also clearing needs capital. The Nazi-Economists pretended that and would forbid any private clearing. They said - - only the State can provide as much capital, as is required to clear, every day, the needed sums. The events of 1945 prevented them from realising this madness. Certainly, if A. owes B. 10,000 dollars, due on 1.4., and B. owes A. 9,000 dollars, also due on the 1. 4., then 9,000 dollars can be cleared on 1. 4. without the aid of any capital.
The technical instrument of clearing, certificates or however they may be named, require no redemption. (Neither, obviously, do book accounts or electronic accounts have to be "covered" and "redeemable" for this purpose. - J.Z., 14.1.03.)
Experience shows that under the present currency system, from time to time, all (J.Z.: rather: too much) currency disappears from some economic spheres or even from whole communities, so that e.g., labour against food cannot be exchanged. In this case it must be permitted to organise on the same day a clearing which makes the exchange possible.
Examples and a short but very good explanation of the here to be applied principles are to be found in an article by of John DeWitt Warner, in volume 1895 (and 1896) of the Journal "Sound Currency", published at New York.
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Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 19. III. 1949.
Dear Mr. Meulen,
the economic importance of interest is very considerably overestimated by all elder economists. Modern management science ("Betriebswissenschaft") began to consider the matter from a statistical point of view and found that the importance of interest is restricted to special cases.
For England as well as for the US, it has been calculated that interest contributes no more than about 5% to the national income. (Benjamin R. Tucker, in "Instead of a Book", page 177: "Who is the somebody?", obviously did not know statistics, as we do, about the national income. Thus he placed the interest taker there where Karl Marx had placed the "capitalist".)
The numbers of the income-statistics are propped up by the figures of factory statistics. The interest, that a factory must pay, is about 1 - 2% of the turnover. There were exceptional cases as in the glass industry. The glass works borrowed much capital to procure the new machines invented after WW I. Their interest burden amounted to about 10% of their turnover, but their burden through wages diminished so considerably that the interest-burden was hardly felt.
The well-known tables for compound interest, such as those of Inwood or those of Spitzer-Foerster (Professor Foerster talks of me in the preface of his edition of 1934, in a very flattering manner, which I am immodest enough to mention here),
(J.Z., 14.1.03: Can anyone send me a photocopy of these remarks? I offer Beckerath's three monetary freedom books in exchange, via e-mail, in RTF, to the first one who sends me such a copy, or the text scanned-in and proof-read, in plain text or RTF!)
do teach that, for loans of about 12 years or less, the interest charged to the borrower amounts to less than the terms of repayment and plays, on the whole, a subordinate role.
Monthly rate to repay 100.000 money units by 60 monthly rates,
when 1/4 % monthly is charged for the not yet repaid part of the loan = 1797 units
at 1/3 % ………………………………………………………….. = 1842 units
& at 1/2 % …………………………………………………………. = 1933 units.
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Proudhon and even the much better informed Tucker raised, as the most heave objection against the monopoly for note-issue, the high interest which the monopolist was able to charge. But even in the case of a complete monopoly, the interest (discount for bills) is not so high and surpasses seldom 1/2% monthly, and amounts in England, sometimes for many months, not 1/4 % monthly. The harm caused by the monopoly for note issues is of another kind and it is still much greater than the elder theorists presumed it to be, so it seeems to me advisable to eliminate the interest question entirely from the public discussion about the theory of Free Banking.
Proudhon spoke much of mutual credit and demanded that such credit should be gratis. What he meant by mutual credit is simply "clearing", whose theory and practice at that time were not yet developed, so that even a good terminology was missing. ( Jevons tells us in his admirable "Money" - - burned at the 23.11.1942) (I thought it was 1943! A typo? - J.Z.) - - that the wholesale-merchants of Birmingham, still in 1870, believed clearing to be a quite unsound and dangerous kind of payment. They sent every day a messenger with notes to Liverpool, to pay there in cash.)
My understanding is, that the credit granted by a note-issuing bank is, essentially, a clearing (Please compare Bill IV of the "Four Bills") and that, in order to remain an act of clearing, it must be equipped with a high interest. A high interest rate induces the borrower to repay the credit as quickly as possible. That means here, the notes issued are quickly drawn out of circulation. So they do not lose their true nature and do not degenerate into interest-less bills of exchange. Their true nature is that of cheques, to be made good by clearing. (The term "Verrechnungsscheck" (Literally: "clearing-cheque" - J.Z., 14.1.03) is quite unknown in English banking business, but very well known in Germany and other countries.)
Credit is the only legal form of an economic procedure for which the adequate legal form has still to be created.
In the explanation to the "Four Bills", provided by Zander, the matter is well pointed out. I regret that this explanation is not translated into English.
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Very truly Yours - signed: U. v. Beckerath.
The most natural way would be to divide the returns from interest from time to time among the borrowers, by a scheme similar to that by which insurance companies divide their surplus among their insured. For mutual banks of issue such a procedure would be the most natural, but for other banks of issue it would be possible. The dividing of the surplus was for a long time confined to insurance companies on a mutual basis. But later the joint stock companies found methods to let their insured participate.
In the case of note-issuing banks, the effect would be that borrowers, who repay their loan quickly, get more in "borrower's dividend" than they paid in interest. Those borrowers, who delay the repayment will pay more interest than they get in "borrower's dividend". For most of the borrowers the effect would be that they pay "net" (difference between interst and "borrower's dividend") about the administration cost of the bank, probably about 2% p.a.
If the credit is really mutual, in the sense of Proudhon, then it is the same, whether it is gratis or is charged with an interest of any amount.
Bth.
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19. III. 1949.
Dear Mr. Meulen,
in "The Individualist" of February 1948 you express your opinion that sickness insurance in too dear. You are quite right, the matter considered from an economic standpoint, although the premiums are exactly computed by the actuaries.
In the year 1935 there were in the public health insurance in Germany on 100 members 184,6 cases of claims for sickness expenses + 40,5 accident cases. But often people do not document the average risk of the insured (which in England will not be very different from that in Germany). E.g., most people do not have the mentality to claim indemnification for small expenses. Also their risk to get sick (I suppose, that of the uninsured. - J.Z.) is considerably less than that of the average insured. For these people a kind of insurance would be suitable in which, in case of sickness, the following would be granted:
About 80 % of the expenses occurring in (say) 90 subsequent days, insofar as the expenses depass (exceed? - J.Z.) about one month's income, the latter perhaps fixed as a multiple of the premium.
The premium would be much less than 1/4 of the premium charged now.
Very truly Yours - signed: U. v. Beckerath.
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(J.Z.: Many years ago, I noticed some private health and accident insurance companies here offering, very cheaply, an insurance against catastrophic health costs only, those exceeding e.g. $ 2,000 per year. All expenses up to that amount the insured are supposed to be able to cover themselves, especially if they do earn a normal income. That kind of insurance would have suited me much more than compulsory and rather expensive health insurance premiums to cover every health risk. - J.Z., 14.1.03.)
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21 III. 1949.
Dear Mr. Meulen,
every one of us experienced cases where a man performed a duty although it was in every respect against his interest to do so, and you and I saw or heard of such cases in the war, where a man preferred death to a neglect of his duty, although, obviously, in his case he did not have to fear a court- martial. Now Kant asks: How are such cases to be explained? Were the men crazy, so to neglect their own advantage? Was their motive a kind of superstition ?
In this way Kant approached the problem, departing from experience, and tries to detect, what kind of motives may have worked in these cases, unconsciously or consciously.
The problem cannot be solved by starting from the history of the sense of duty, however interesting and important this history may be.
A second problem arises at once: Why did the sense of duty developed in men (in some men), in dogs (in many dogs), in storks, in elephants, camels and certainly also in other animals? And why did this sense not develop in so well organised and gregariously living animals as horned cattle, herrings and flies? The element which enabled the animal to become a moral being must be detected and I think that Kant discovered it.
(Perhaps I do underestimate horned cattle. Some observers assert that the great herds in South America are protected by bulls whose sense of duty is not inferior, they say, to that of any sentinel in any human army. If a puma is smelled and the beast which smelled it gives the signal, then the sentinel bulls at once advance to the spot where the puma is expected to be found and kill it, if it does not retire in time. But - - it is said - - many bulls (not the sentinels) flee at once when they hear the roaring of a puma or smell it. Obviously, there is no sense of duty in them.)
Very truly yours - signed: U. von Beckerath.
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U. v. Beckerath, … 22. III. 1949. Your letter of 20.cr.
Dear Mr. Meulen,
you write: "There Is still great bitterness here against Germans on account of the revelations of the terrible conditions in the Concentration Camps."
If the bitterness is felt against those men and women who are responsible for these conditions, it is just and should never be extinguished. But it is felt also against those who pondered on ways and means to act anyway, to help the victims, to remove a government that creates such conditions, to remove it in any way, by murder, by revolution or in other ways, it is most unjust. But we corresponded already on "collective responsibility". You know of the beginning of the revolt at Haiti. The war-cry of the rising Negro-slaves was: "The whites killed Jesus Christ - - let us kill the whites!" And to retaliate for the long sufferings of Jesus Christ at the cross, they tugged the whites through the sugar-mills. Collective responsibility!!
You write further: The question is: How much did the educated Germans know of these things going on?"
(J.Z.: Even if they knew of the enormous crimes committed by their government and its supporters, what could they do in the positions they found themselves in? In which country are the people sufficiently prepared to overthrow a tyrannical government and to bring its fanatics to justice? Knowledge of a great wrong is rather useless without the knowledge on how to effectively and fast end it. Anarchists and libertarians know that - about many existing wrongs and they "battled" them, in one way or the other, for a long time - and, largely, in vain! - J.Z., 14.1.03.)
You will understand that I must here judge from my own restricted experience. I estimate that about 50% did not believe in such conditions, and a great number, whose percentage I dare not estimate, does not even believe it today. Among the workers it may have been the same.
You ask: Did you know that men were being starved and gassed in these camps?"
What I knew already in 1933 is that the starved and gassed were the happier part. Where the men (but by no means only the men, also very many women and children) were gassed, there was still a small remnant of humanity in the soul of the commander. Gassing kills without much pain and perhaps without pain at all, so that the inhabitants of a fugitive camp in Bavaria, some weeks ago, earnestly demanded to be gassed, to end their sufferings. But read the old stories of mediaeval torturing or the description of torturing in the 1600 still existing "old style" prisons in China, or the procedures of the GPU in Russia or the police tortures in Christian Poland (now replaced by those of the GPU - - now named NKWD), then you know what happened, very probably, much more than 100, 000 cases in the camps, in the cellars of the Columbus-House in Berlin, etc.
I succeeded in bringing together a small group of men, like the young son of the count Ballestrem, formerly president of the Reichstag. The young Ballestrem was in 1933 occupied at the ministry for foreign affairs and was one of the most noble hearts I ever found and of an intelligence worth the traditions of his house. Our standpoint was: Germany is now occupied by a horde of Huns, she lost her freedom for at least one generation, a revolution is impossible, the army being on Hitler's side (although with very great reluctance), that we must try to change the masters. At last we agreed that if one regiment of the Austrian Army would have courage enough to cross the frontier and proclaim at the same time an impressive social programme, then, very probably, a large part of the German army would join and certainly a very large part of the civilian people. Ballestrem talked at Vienna with persons of influence, but was obviously betrayed. One day his corpse was found in the Danube. The plan was given up.
Then plans followed to talk with persons at London, Paris, etc.
You know what aims these persons pursued. They agreed with Hitler, concluded treaties with him and many found, he was not so bad as the German opposition had represented him. And yet the Chamberlain, the Halifax, the Blum, and the Spaak must have known what happened every day in the concentration camps. Their treaties with Hitler contributed much to paralyse the resistance groups like ours. (In Germany there were thousands of such groups.)
At last we conceded to the hints of the communists in our group, and were ready to expel the devil by Beelzebub and to try it with Stalin. And what did the champion of the world's proletariat do? He, too, concluded a treaty with Hitler.
Today I am convinced that all persons here named were quite indifferent to the fate of the prisoners in the camps.
(J.Z.: Too many people still consider such mass murders and crimes to be merely "internal affairs" of the "nations", not even the governments concerned. M., too, in other passages, was inclined that way. - J.Z., 22.5.03.)
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All of us were convinced that the war was on the way. Here a Berlin we saw the preparations every day. We saw that we must, in some way, consider the possibility of a war. In the weeks before Zander emigrated, we talked sometimes about the problem. We worked out a program on about the following lines: The emigrated Jews should use their influence and should try to form a kind of exile- government. At the day of the outbreak of the war,
(J.Z.: Later B. recognized that that day would have been much too late for such an appeal. It should have been made, in a quite trustworthy form, years before the war and every German soldier and officer should have come to know exclusively rightful war and peace aims of the Western Allies and of their own and multiple governments in exile, all only for volunteer communities. Alas, those who escaped the Nazis were at first interned, as if they were Nazis themselves! - J.Z., 14.1.03.)
the exile government should appeal to the German army, not to fight for such a government as that of Hitler. All German soldiers were to be invited to come over to the lines of the British, etc., where they would not be treated as prisoners but as foreigners, who were, for some days, forced to bear arms against the Allies. Every rifle should be paid with A dollars, every aeroplane with B dollars, every gun with C dollars, etc.
The men could then emigrate to the USA or work in British ammunition factories, as they choose.
Zander conceived fully the importance of the plan and promised us to do anything to bring it to the knowledge of persons of influence in England.
Meanwhile - - no - - now I remember - - it was in the year 1939 - - I received the visit of the son of Follin, my old friend (who knows you well) a man as good as his father. I reported to him our plan. He thought the plan was worthless. No Frenchman, no Englishman, etc. would agree to treat German soldiers as well as we demanded. The "nation" would demand their treatment as prisoners, even if, by the prospect of such a treatment, not a single German soldier would come over to the Allies. Now I know that the young Follin was absolutely in the right.
Now we did nothing and confined ourselves to continue in working out our reform plans, among which Free Banking (Bill IV of the "Four Bills"), was - - for us - - important.
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What concerns the plan, I derive from a passage at Kong Fu Tse, that the old king W e n of China used such methods and by these methods built up a great empire with trifling war losses.
In 1944 we succeeded in getting a connection to a group of officers, determined to kill Hitler. Rittershausen, who was pretty active at that time, won over the count Yorck von Wartenberg and other high officials at the Price Control Office, but the thing was discovered, the Count Yorck was executed, in a cruel manner and also the former Price Commissioner Goerdeler. I still do not know today where some others ended up, after the Gestapo arrested them.
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Very truly Yours - signed: U. v. Beckerath.
(B. told me that a former pupil of Prof. Rittershausen, then at the legal staff of the "people's court", conducting the show trial against the "conspirators" of the 20th of July, 1944 (whose the tyrannicide attempt against Hitler failed, which was to have been the general signal for a military putsch, and also their take-over attempt of the military headquarters in Berlin), managed to destroy the files of members of the associated resistance groups, especially those of Rittershausen and of Beckerath, so that both survived. Another, about 5,000, perished. I believe that two members of the group of 7, who had drafted the Four Bills, had already previously been murdered by the Nazis in concentration camps: Meis and Unger. Even now I don't know further details. Neither resistance acts nor a revolution nor a military insurrection are easy to arrange under a terror regime, unless such acts are very well prepared, thought through and organized beforehand. Against insufficiently informed, prepared, trained, armed and organized people the terror regimes are often all too successful, for all too long. The technological details of establishing and maintaining such a terror regime are well known. This has become a "science". Effective resistance against them has not yet been similarly studied. The same applies to war-making as against peace-making. Even libertarians have so far not bothered, to my knowledge, to work out the details for such a programme. I tried, in my two peace books, now online and accessible through either www.exterritorial.info or www.panarchism.info - J.Z., 13.1.03.)
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U. v. Beckerath, … 23. III. 1949. Your letter of 20. III.
Dear Mr. Meulen,
many thanks for your communication about the deposit-business of note-issuing banks. It seems I overestimated the deposit-business.
What concerns the remarks of Huebner, it may be that he simply said: The deposit-business gave an opportunity to win what was lost by the Act of 1844. That would not be contradictory to your communication.
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Is that the main question: Which type of bank is easiest to establish?
A bank of your type can easily be started, even in times of prosperity, where the whole world is in possession of means of payment. A few days after it is started, it will have its borrowers and the public will accept the notes as long as it is convinced of their confertibility into gold or into notes of other and well-established banks. To make it still easier to establish a bank, even if this may be technically possible, is not needed.
During the great money-crisis of 1893 in the US (and certainly also in former crises and also later, also 1907) banks of "my" type were started often in less than one day and, sometimes, within a few minutes. In times of less acute money famine, this would not have been possible.
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In the year 1928, in Germany, the amount of wages was 42.5 milliards of goldmark.
For a month the amount was about 3.5 milliards of goldmark. If a bank of your type would furnish these 3.5 milliards in their notes, the notes must be backed by about the same amount of gold or of notes of well established banks. (If the cover is in gold coins, or good notes of other banks, that would otherwise circulate, then, to that extent, the circulation would be reduced by this procedure! - J.Z., 14.1.03.) Even in the year 1928, the best of ever reported by German economic history, that would have been - - so I think - - impossible. The richest men would then not have been able to bring such an amount together.
By banks of my type it would have been possible. The Professor Hirsch estimated at that time (a little after 1928, if my memory does not deceive me), that the amount of commodities in the stores, ready for sale, was about 30 milliards. Of that amount must be deducted, for the purpose of our investigation, the value of jewels, paintings etc. The remainder would have been great enough to "cover" the certificates of banks of "my" type.
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The best time to start banks of my type would be the time of a crisis. To start at such a time a bank of your type would be, technically, possible; but would it be the best time?
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You are right: Shopkeepers will be more willing to accept notes of your type. But more important seems to be what kind of notes they will accept if they have to choose between nothing to sell or to accept irredeemable private notes. And if the shopkeeper is a borrower of the bank of my type or if he is the borrower of a borrower (borrower of second order) then the acceptance is no burden for him and no risk. He can, at the same day or the next, repay by the certificates a part of his debt. A shopkeeper, who is a borrower of any order and refuses the acceptance of the certificates, violates the provisions of the bank and pays a penalty for the non-fulfilment of the contract, high enough to take from him every temptation to repeat it.
(If he is the member of a cooperative bank of issue, established by the shops of a shopping centre, largely to promote their sales, through short term loans to employers, for wage payments, then he will be very interested to accept the notes of his coop bank, at least to the extent that he has goods or services for sale! - J.Z., 14.1.03.)
I trust in contracts in case there is a good administration of justice in a country. In monetary affairs that kind of trust is the most important. The shopkeeper must have it. If the public looses its trust - - the word taken in its usual, moral sense - - then nothing more happens than that all note-bearers will rush into the shops, bringing their notes, certificates, or however these papers are called, buying as much as possible with them, and, instead of a crisis, a boom occurs.
All inconveniences are counterbalanced by this characteristic.
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The application of the system to foreign trade is possible.
Suppose a shopkeeper accepted notes from a bank of my type for an amount of L 1,000. He is no borrower of the bank. He sends the note to the bank and gets a cerdificate in which the bank assures that he, who presents it, can get L 1,000 in notes. Has such a certificate not value at all factories in connection with the bank and which are accustomed to pay the wages or part of the wages in notes of the bank? Certainly, they have a value very near at par, say 99 1/2 %.
If that is admitted, then it follows that such certificates keep their value at exchanges abroad, in the case of Germany at Brussels, at Amsterdam and probably also at Paris. Everyone who has to pay a German creditor will buy the certificates. For the German creditor it will be no problem to sell the certificates to one of the mentioned factories.
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The profit of my bank is all the greater, the more rapidly the notes return to the bank. At once the bank can issue new notes and grant new loans.
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You say on redemption: "… wherever it was allowed to develop without State interference, it adapted itself beautifully to the state of mutual trust, and was of vast benefit."
But the main interference of the State was, apart from acts like that of 1844, to compel the banks to keep a high cash reserve, that is to do, what you demand.
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Buying and selling price of gold. I accept your objection.
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The case where no rich man is available (as the development of mutual savings banks and savings and loan banks on a mutual basis proves) and trust among the poor people is great enough, is exactly the case of Germany and many other countries. Even India and China are not at the hopeful beginning of such a movement.
You think - - what is natural and well-done - - first of all of England and there, in the first place of London. But Free Banking is destined for all countries with monetary calamities, that is, more than 9/10th of the world.
In Germany there is now a deep distrust against rich men in general. The crisis of 1932 is not yet forgotten. Also, some of the rich men, and just those most mentioned, were allies of Hitler. The people will have nothing to do with such rich men.
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Very truly yours - signed: U. v. Beckerath.
23. III. 49.
From the German Statistical Yearbook for 1937 I take the following figures:
Number of "Kreditgenossenschaften" (credit cooperatives) in Germany,
1933 = 21,056
1934 = 20,564
1935 = 20,230
1936 = 19,960
The Nazis were not friends of the cooperatives; they tried to replace their business by that of the banks, from their standpoint quite rightly, seeing that they had many friends among the bankers but very few among the cooperatives.
Reporting cooperatives, whose central was Deutscher Genossenschaftsverband (Union of German Cooperatives)
Year Number Members Turnover in Millions of Marks
1913 1,493 815,065 22,172.2
1933 1,307 1,111,508 26,953.4
1934 1,310 1,116,916 29,043.0
1935 1,318 1,162,787 32,148,? (Punched out! - J.Z.)
1936 1,341 1,202,578 37,012,0
Reichsverband der deutschen landwirtschaftlichen Genossenschaften, System Raiffeisen
(Agricultural German Cooperatives, System Raiffeisen)
1913 16,007 1,588,381 7,093.0
1933 18,852 1,924,266 11,706.6
1934 18,906 2,015,560 13,298.1
1935 18,880 2,010,882 14,789.0
I take the numbers from the yearbook as they stand there, without the explanations about the small differences in the sums of the figures of the cooperatives. The principles of the "Statistisches Reichsamt"and the Unions of the Cooperatives in framing the numbers were not quite the same.
You see, the credit on a mutual basis played a great role in Germany, probably very much greater than the credit of rich private bankers. For Germany the mutual basis for note-issuing banking would be quite natural and the way of least resistance in starting note-issuing banks. The Yearbook does not contain statistics about private bankers.
Private bankers showed themselves so blocked, so "cautious", so unwilling to accommodate their business to the new conditions of the economy, that long before the first world war they were eliminated.
Bth.
The gradual replacement of the private banker by other banking firms, joint stock companies, public banks and mutual banks, was a silent but great social revolution, whose history is still to be written. The fact that poor people more and more gained trust in their own institutions is of the greatest social and economical importance. The movement is by no means restricted to Germany. In India also the mutual banks begin to do business which the "Zemindars" dare not to tackle. They are too "cautious".
An effect of the new Mutualism is that the rich people are less hated than considered with contempt. When the Russians came to Germany, they did not understand that and do still not understand it doday.
Bth.
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U. v. Beckerath, … 25. III. 1949.
Dear Mr. Meulen,
"Who is the somebody?" asked Benjamin R. Tucker ("Instead of a Book", page 177.)
In times where money is hoarded, the people are not conceded the right to create their own means of exchange by free banking. Then takes place a reckless fight of the owners of goods, one against all others, for the customer who is under suspicion of still possessing some money. As all other wars, this fight costs something, In times of a crisis
the costs are much higher than the employer's profit and are the highest item in all production plans. The "somebody" is then the agent, the sub-agent, the agent of the third class, etc., all men who try to sell
the commodities, however hard their task may be. Tucker did not take that sufficiently into consideration, although this might have added some very powerful arguments for the indispensability of Free Banking.
The present monetary system in all countries of the world extorts precisely then exaggerated sales costs when there is a boom, which was the case in 1938 in Germany. It was a boom considered from the standpoint of the shopkeeper, whose stocks quickly disappeared from the shelves. From all other standpoints it was simply a lack of supply. The conversion of industry to war industry was already in full swing in 1938.
swing. Nevertheless, the sales costs were so high in this year, that they would have been sufficient to raise wages by more than 50 %.
If the production is financed by Free Banking, as a mediator between capital and last consumer (not simply by note-issuing, like the printing of the Assignats financed the government) and it production is ordered for some months in advance, then selling costs will be a trifling item.
In a book which I bought during the currency reform, for the purpose of not losing too much (always buy then, never save!) I found the here enclosed table. I think the table is interesting,
Very truly Yours - signed: U. v. Beckerath.
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Standard Figures for Industry.
Professor Julius Hirsch, Copenhagen, 1940, Table 32
All Costs arranged by Production and Selling Costs in 10 Branches of German Industry, 1938. (Kuespert, Industrielle Vertriebskosten, No. 601 of the Publications of the Reichskuratorium fuer Wirtschaftlichkeit, Stuttgart, 1938.)
Branch of Industry Production Costs
Materials Wages Overhead Production Costs
in % of total costs
Photographic Films Industry (Films only) 33 6 21
Stationery Industry 32 8 19
Meat Industry 71 4 11
Fat Distilleries 87 2 5
Seal Making 25 50
Gum Manufacturers 50 10 17
Hosiery Industry 49 14 21
Tin Toy Industry 53 19 17
Metal Engravers 20 26 34
Military Passementarie (? J.Z.) 40 22 22
Average 46.1 (12.4) 32,9 (18.5)
Selling Costs Total Costs Selling Costs in % of Margin for
Value Added by Manufacture
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Photographic Films 40 100 70
Stationery 41 100 56.1
Meat 14 100 44.4
Fat 6 100 42.6
Seal 25 100 37.2
Gum 23 100 37.1
Hosiery 16 100 31.4
Tin Toys 11 100 25.0
Metal Engravers 20 100 24.1
Mil. Passem. 16 100 19.6
Average 21 100 38.7
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Bth.
25. III. 1949
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U. v. Beckerath, ……… 25. III. 1949.
Dear Mr. Meulen,
it seems, no socialist or liberal Party until now proclaimed the simple demand: A man should have the possibility to live without a special permission of an employer, an authority, a labour office, a housing office, a party, a church, etc.
One of the necessities or living is the ability to pay, which should be no less guaranteed than life itself.
Until now only the Free Banking advocates conceived this simple truth.
Monopoly of the means of payment is no less tyranny than any other. Morally equal to monopoly is a prescription that ties the possibility of creating means of payment to conditions such as to keep in stock a hoard of gold coins to redeem the created means of payment on demand. It a banker voluntarily promises to fulfil such a condition he may do so, if he is able to fulfil what he promises, but as prescription the condition is tyrannical.
My aim has been to enable the active part of the people to get new means of payment by own actions if a currency famine threatens personal and political liberty and, by this, life itself. (That it regularly does, although this effect of a currency famine has still now not been acknowledged.).
If the necessity of creating new means of payment arises from one day to the other (look at John DeWitt Warner's dissertation "The currency famine of 1893", in the journal "Sound Currency") than possibility to honestly promise ) redemption in gold or other paper money is not given. The possibility of creating irredeemable emergency money must therefore be an aim of everyone who wishes so much liberty for individuals as can be technically provided - - so I thought and I demanded it in my books.
But the permission to create emergency money is not sufficient to prevent a crisis. Such a prevention needs a second possibility, which I beg to point out.
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Sometimes simple workers were authors of great inventions. Potter, a boy of 15, invented the valve gear (selbstaendige Steuerung) of the steam engines. He used twine instead of rods, but he forced the machine itself to regulate the condensing of the steam, what otherwise he had to do by hundreds or thousands of manipulations
a day. Potter went to his comrades to play with them. Of course - - after his invention and absence was detected, he got beaten - - the usual kind of reward of humanity for its benefactors.
Another benefactor - - that is my opinion - - is the unknown worker who wrote to Robert Owen, that his system would be imperfect if not all men ordered their requirements for a long time in advance. He asserted that a commercial crisis would be impossible if all men ordered all that, which they must buy in the course of - - say, a year, in advance, at the stores where they usually bought. He asserted that by such advance orders industry would have a sufficient stock of orders, so that no worker must ever be dismissed for lack of orders.
I think that this worker was right in principle. Owen - - I read - - printed his letter in the "Crisis", but he did not take into consideration that after production was finished there must be means of payment to buy the products. But even intelligent men cannot foresee all necessities at once.
On some points this unknown worker went too far. A year is too long a time. Further, it will, probably, be sufficient if some 100,000 order their supplies in order to provide work for millions.
In my article on Milhaud's proposals, I have said more about it.
Very truly yours - signed: U. v. Beckerath.
(Not required is such an order system for consumer goods and services that are in daily demand - if only the consumers are sufficiently supplied with means of exchange, and this these suppliers, between them, could easily arrange, in their own interest, liquidifying the "shop foundation" that they do offer between them, by means of the issue of goods and service vouchers, in money denominations, lent on short terms to employers, so that the employers could pay wages and salaries with them. Alternatively, the means of payment issued, utilised and streaming back to the shops would be account credits at a local shop association bank. Then advance orders for such goods would not be required, since then this demand and these sales would practically be guaranteed, in the same way as offered and accepted tickets guarantee the sale of the performances offered with the tickets. But goods and services that cannot be as easily and regularly sold, if the currency supply is competitive, as such consumer goods and services, can be safely sold upon advance orders, while, otherwise, they could be produced only be produced speculatively, i.e. for an uncertain market, one that depended, e.g., upon "fashions". - J.Z., 15.1.03.)
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U. v. Beckerath, … 26. III. 1949.
Dear Mr. Meulen,
Benjamin R. Tucker was in the right, on all points that he dealt with, in his discussions with Henry George, but nevertheless, my impression is, he treated him too harshly.
George considered the government as the natural trustee of the people. This belief he shares with more than 99.9% of all men. Tucker belonged to the less than 0.1 % who do not believe that: He was a profound thinker - - much more so than George was - - but he treated George in a way as if the non-statist product of Tucker's own thinking (certainly one of the most important that a human brain has ever produced - - oh, I say brain - - in this case Vauvenargue's word is to be applied: "Les grande penséés viennent du coeur" ("The great thoughts come from the heart") were quite self-evident. (Instead of a Book, page 353 and others.)
George's standpoint at this time was only discussed by Benjamin R. Tucker and the Anarchists. This standpoint is still the never discussed basis of all politics, Bolshevist politics, liberal politics and any other. An error so widely spread, cannot be used to reproach a man as it if were his individual error and one cannot say to him: A little more logical thinking and you would have avoided the error.
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At page 126 Tucker cites a passage where George pronounced himself as an adherent of free banking and, nevertheless, as an adherent of government money. I assume that George understood nothing of monetary history and really did not know that note-issuing was an essential part of banking in England and the US. At his time this fact was already forgotten to such a degree, that the "man in the street" certainly did not combine the notions of "note-issuing" and "business of a banker", just as today he does not combine the two notions in colloquial speech. I think it possible, that George meant merely "deposit-banking".
That delivering up money-production to individuals can never man an inflation and, in the whole, is far superior to money production by the State, that is a truth, newly discovered by Tucker but quite forgotten by the best economists with such rare and astonishing exceptions as the author of "Free Banking", W. B. Greene and very few others.
In all what concerns the role of money and means of payment, George was a "man of the street", however brilliant an author he was in other respects.
I think it possible that George, if directed to his errors in a kind way, would have become an adherent of Free Banking. But always attacked by Free Banking advocates and represented as illogical and even as a juggler, he did, quite naturally, become an adversary. From the writings of George I won the impression that he sincerely sought truth and that his mind was liberal.
Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 30. III. 1949.
Dear Mr. Meulen,
there are many kinds of interest in the economy, reward for waiting, compensation for risk, etc., but - - in my opinion - - the most important in that kind of interest which represents the share of the lender in the product, produced by the borrower with the lender's capital.
Apparently, there still does not exist, as yet, an investigation about the average rate that capital produces in a year. Rittershausen tried an estimate in the year 1928. He found that in the factories and in the agricultural estates, where we can get an insight, the percentage was at least 30 %. By this number it was at once clear, that an interest of 8%, which at that time was usual, still left a considerable amount to the debtor, so that it was profitable to lend at 8 % p.a. We found some cases where a capital produced in every year its own amount. Some meadows at the Havel were worthless because they were inundated every year. Then the owner borrowed several thousand marks to embank the meadows. The effect was an annual gain of the same several thousand marks which he had borrowed. The interest he paid was no more than about 8 % p.a.
In the present state of the economy the cases where a capital produces 30 % p.a., or much more, will be numerous, not only in Germany and other countries destroyed by the war (Poland, Italy, Greece), but also in England, I think. But if interest and repayment of capital must be provided in exclusive currency, then the trouble of the borrower, to get the exclusive currency will, in many cases, be so great, that he cannot pay more interest than the low percentages usual in the last two centuries.
Justinian, in his Corpus Juris, limited the annual interest to 6%, but he permitted to take from peasants 30 %, if capital and interest were not to be returned to the creditor in money but in goods. Many lawyers in our days do not understand this wise and just provision. 30 % in goods are, for the peasant, a lighter burden than 6 % in money.
Free Banking can help the debtor to stand so as if he paid with his own product instead of with cash (exclusive currency.) Therefore, I expect, after the introduction of Free Banking, a rise in interest - in all cases where neither the interest need paid nor the capital returned in coins or notes of a bank like the Bank of England.
A very high interest of that kind enables the working classes to get a superannuation at the age of 55 or at a younger age.
A worker, who will get 10, 000 Dollars after 300 months, must pay monthly $ 22.42 if an interest of 1/4 % monthly is granted. He needs to pay $ 10.51 if an interest of 2/3 % monthly is granted. Most American workers are able to pay $ 10.51 a month. (At 3/4 % monthly the contribution would be $ 8.92.)
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Very truly Yours - signed: U. v. Beckerath.
(A few years later, he produced a table indicating how small the annual contributions to old age insurance could become, or how large the old age pension, if the premiums were calculated upon the supposition that they would be invested productively at 15%, credit-insured, safe from inflation, investment regulations, taxation and other confiscations by the government. These figures are truly astonishing and indicate that a man, with moderate contributions during a working life of 40 years, could, at the end, be a multi-millionaire, if his total income from his thus achieved old age pension over 20 years were capitalised. I would expect something like a revolution to occur in most countries once its people become aware that governments prevent them from thus becoming multi-millionaires by their own labours! Until the appearance of microfilm, floppy disks, websites, e-mail and CD-ROMs there was in practice, no opportunity for him or for me to get such facts published anywhere. And even after they are published, the insufficiently informed would mostly merely raise the old objection: "Usury", although the debtor of these productive investments would, in most cases, also gain 15% p. a., if not more. Rightful and rational thinking is all too rare. - PIOT, 15.1.2003.)
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U. v. Beckerath, … 1. IV. 1949.
Dear Mr. Meulen,
in his considerations on the cost principle Benjamin R. Tucker did not distinguish between:
1.) costs involved in the production of any commodity now ready for sale, and
2.) costs occurring for future production.
Jevons, in his considerations on value emphasises that the value of all things is necessarily determined by the future costs of production of similar things. Example: A commodity X is ready for sale and required 10 hours of labour for its production. At the day when the commodity is ready for sale, an invention is published by which the same commodity may be produced by an expense of 1 hour. Then this commodity can no more be sold so that the really applied 10 hours are compensated. The difference is a loss for the producer.
Jevons derives from this simple but profound (although by no means new) consideration the economic impossibility of the State socialist's "labour money", calling attention to the fact that in a even in a non- progressive society the conditions of production (just like all other things in the world) never remain the same: They become easier or more difficult.
I think that a synthesis of the two principles - - that of Tucker-Warren and that of Jevons - - is possible. If production is sold in advance - - say: in the average the production of 6 months or, at least 3 months - - then the producer gets his really applied costs so as Warren and Tucker demand it. On the other hand, the economic possibilities for Jevons' principle are given at a measure sufficient from an economic and even from a moral point of view.
You know the selling by applying an option. A gilt-edged paper or a share is sold on 11. IV. 1949 for a price of 100, so that this paper is to be delivered on 1.V.1949 and paid for at the same date. The seller may agree on an option of 1% if he decides, on the 1.V.1949 to keep the paper, after all, in his portfolio and the buyer may also agree to an option, perhaps likewise at 1 % (or less or more) if he decides cancel the purchase.
This kind of buying and selling should be applied as widely as possible. For Germany, whose production in 1928 was estimated at about 7 or 8 milliards of gold-mark monthly (average), I would think it natural to sell about 3 milliards at an option of 3% for 3 months, in the average. (I think about 1 milliard for 1 month with an option of 1% and 1/2 milliard for 6 months, with an option of 6%, the rest of 1 1/2 milliard for a time between 1 months and 6 months.)
A great part of the production, such as coal, victuals and many other commodities do not need an agreement in order to be sold with 100% certainty. A better connoisseur of political economy would propose other figures.
To introduce the system into the habits of the working classes (not only factory workers) I would say: Workers, why not keenly use the economic methods that were until now restricted to the class of the rich people?
Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 4. 4. 1949. Your letter of 1.4., received to-day.
Dear Mr. Meulen,
with the greatest pleasure I learn from Your letter that
a.) a copy of "Free Banking",
b.) an abridged Indian edition of "Mutual Banking"
are on the way to me.
Many, many thanks. That the cow-worshippers were able to abridge such a work as "Mutual Banking" will be presented by future historians as a severe objection against Indian mentality, and the historians will be in the right.
(Note by J.Z., 15.1.03: Not all Indians are cow-worshippers. An "Indian" mentality exists no more than an English or a German one. That this edition by an Indian libertarian organisation was somehow abridged was only brought to my attention by this letter. Alas, even the 1875 edition - reprinted by Hyperion Press in 1975, of Greene's "Socialistic, Communistic, and Financial Fragments", brings only extracts out of "Mutual Banking". Thus I have still not seen a complete edition. This will, probably, be typical until the affordable alternative media re fully used by libertarians. )
If I would have to speak to an Indian, I would tell him: If you were to cut off from one of your elephants the trunk, the tail and a tusk; do you would have simplified the elephant by such an operation and would now understand his nature easier than before??????? 100 buckets of the most holy cow-urine will not clean the man who abridged W. B. Greene, before Vishnu, the great conservator, although, if the pious Brahmins are right, it cleans (1/2 bucket is sufficient) murder and even cheque forgery.
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It was my intention to read, after the war, all that W. B. Greene had written. He must have been one of Americas most profound thinkers. The German proverb is:
"Es kommt erstens immer anders, zweitens als man denkt." ("Events happen always differently, especially from those one predicts.")
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The English Society for the reprint of scarce old tract should care for a new edition of Greene's works.
Very truly yours - (unsigned slips in my photocopies of Beckerath's letters to M.)
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6. 4. 1949.
Dear Mr. Meulen,
about 20 years ago Rittershausen delivered a series of lectures on banking at the University of Frankfurt, especially on mortgage banking. That brought him into contact with many bankers and mangers of commercial banks. When it was possible, Rittershausen talked to them about the possibility of private note-issuing by commercial banks and private bankers. When these men heard him, they felt as if Rittershausen would try to seduce them into counterfeiting cheques or committing burglary. Their answer was regularly: The only monetary reform needed would be the suppression of the State banks of Bavaria, Saxonia, Baden and Wuerttemberg, so that the Reichsbank would finally get a complete monopoly. (The issue of these State banks - - notes without cours forcé - - was in 1928 = 184 millions of Reichsmark, about 4 % of the whole amount of circulating notes.) Their statement was rights, that Rittershausen was the only economist among the professors, who opposed the idea of a note-monopoly of the Reichsbank. They began to distrust him and distrust him still today.
R. and I often talked about that psychological phenomenon. Our result was: If a monetary reform in Germany becomes possible, it will not be with the help of the banks but against the banks. We observed that the views of factory managers and wholesale merchants were the same as those of the bankers. We came to the conclusion, that the economic rulers of Germany had lost all sense for that what must be done, for the danger by which they were threatened and for the true meaning of State currency. We agreed that in a few years some new statism, worse than any before, would replace the present rulers. At that time we did not yet take National-Socialism into consideration but thought, first of all, of the National-Bolshevists now ruling in Russia, China and other countries - over about 1/3 of humanity,
But their time had not yet come.
Very truly Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 7. 4. 1949.
Dear Mr. Meulen,
in "Mutual Banking" occur two kinds of payment, that mathematically and administratively appear as interest, but economically are not interest, the word interest taken in the usual meaning and as Benjamin R. Tucker used it. These two kinds are made evident, in the most simple way, by two examples:
1.) Long-term mutual banking.
Mutual banking without note-issues, is now wide-spread in the world. In the US, the Building and Loan Associations and the Mutual Savings Banks, in Europe the Associations for Mutual Credit, e.g., the "Kreditgenossenschaften" (Credit-cooperative - J.Z.) in Germany. In India and China the system is also well known. In China the German "Kreditgenossenschaften" served as models. The Indian model I do not know but they seem to resemble the US Mutual Savings Banks.
The kind of interest that I beg to explain does occur in small societies more frequently than in large ones.
Suppose that a Building Society, from the subscriptions of the members, has now an amount of L 1,000 ready to be lent out. There are three applicants. The standard duration of the loan is 144 months. The standard interest is 5/12 % monthly for the not yet redeemed loan. The monthly payment of the debtor would then be L 9.25. (I take the number from Spitzer-Foerster's table for compound interest.)
Now the secretary decides that the applicant offering the highest monthly repayment gets the loan. One of the applicants offers L 11 monthly and gets the loan. Neither the secretary nor the debtor know, that this rate contains an interest of 0.689 % monthly. If there would be no interest at all, then the monthly rate would be = 1,000 : 144 = L 6.994. The difference of 11 - 6.994 = L 3.006, after deducting the administration costs, is distributed among the members of the society. So it may occur, that the members get an interest on their savings that is much higher than 1/2 % monthly, which 20 years ago was not seldom in the US Building and Loan Associations. The highest was the interest at New Jersey, where the small associations prevail. At small associations the "selling by auctions" of the loans is frequent, while at great associations there is nearly always a balance of the money ready to be lent out and of the money demanded by applicants.
20 years ago the matter was much discussed by German "Bausparkassen". Many of them were "interest-less" and thought it unjust to take from the debtor more than the administration costs. The effect was - - of course - - that some "Zuteilungsordnung" (rule for granting the loans) must be established. The next effect was, that the member who got the loan sold it to any other ready to pay its real value. The managers well observed, that the seller of the loan thus got an advantage which the association could have obtained if the principle of "interest-free" loans had not been an obstacle. By some articles I published, I could convince many "Bausparkassen" that an additional payment (in the foregoing example - L 3.006) was not the kind of interest that was really meant by the members, provided, it was merely a compensation for getting a loan earlier than other applicants. In this case the term "Warteverguetung" (compensation for waiting) would be the right expression. Many Bausparkassen accepted this name, too.
The German "Bausparkassen" failed because they used to pay excessive commissions to agents who brought in new members. A savings institution cannot pay commissions like a life insurance company. But many Bausparkassen were founded by agents of life insurance companies, and many of these agents became rich.
I regret very much that a man like Tucker did not investigate the matter. I am convinced that his standpoint would have been: Let the principle of the free market fix the amounts which the waiting members get from the borrowing members.
2.) Short-term mutual banking.
Here note-issuing is essential. There should be a constant demand for notes in general business, which, in practice, is only possible, if the bank's debtors try to procure for themselves the notes in order to repay the advances granted by the banks. To strengthen that mentality of the debtors, the interest (I still use this word) should be as high as possible, so that the debtor deliberates daily: How can I repay the advance more rapidly?
From time to time - - say, every month - - the bank distributes the interest among its members. Then he, who had repaid very quickly, gets more than he paid in interest. For most of the members the result will be that they receive about the same as they paid, less the bank's administrative costs, and those, who were slow with their repayments ("Faule Koepfe" - bad customers) must "bleed".
The word "Benutzungsgebuehr" for the standardised cheques (fee for the use of the standardised cheques) would be a better term than the word "interest", for, considering the matter from an economic point of view, the "interest" of the note-issuing bank is no real "interest" at all.
Monetary science at the time of Greene and Tucker was not yet developed enough to detect the real and essential difference between a "fee for use" and interest.
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Very truly Yours - signed U. v. Beckerath.
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U. v. Beckerath, … 8. 4. 1949.
Dear Mr. Meulen,
with very great interest I studied - - this time with care - - the leaflet of Wakinshaw, "Prosperity for all!"
The index-currency-party is an international party, whose "sub-parties" in the different countries are, probably, tied together by some international organisation. I do not pretend that the organisation is secret or that its internationalism covers aims that must fear the light of publicity. In Germany the party of index-money - - was very strongly promoted before 1933, but the Nazis prohibited it.
The System - - I think firstly pointed out by Silvio Gsell (According to Beckerath, he only later on renamed himself Gesell. - J.Z.) - - a Swiss, emigrated to Argentina - - one of the numerous "half-scientists" - - but not blockheaded, pretty learned - - wrote a good style - - can be designed as National-Socialism without racism. All the more dangerous it is. The antisemitism of the Nazis must be rejected by everyone, who knows Jews personally. But the 110% statism of the index-men reduced even intelligent Jews and scientists of the very high rank of Irving Fisher, whose "Making of Index Numbers" (burnt) I estimate as one of the best productions of the human mind - - so modest book title and subject may seem.
Considered from a purely logical standpoint: The Index-number-money-idea and the prohibition of all credit and every of every clearing of debts by private institutions or private bankers or firms are things without any logical connection. But since Silvio Gsell demanded both in his book, they always appear connected in the publications of the party and its adherents.
The style of Wakinshaw and other index-men reminds me of a story from the Great French Revolution. Robespierre delivered his first speech in the National Assembly. He was such a bad orator and became so confused by the numerous interruptions, that the whole assembly laughed at Robespierre and at last he left the tribune without having finished his speech. One man did not laugh: Mirabeau! His friends asked him: Hey - Riquetti - it seems, you take the guy serious?! Mirabeau answered: I am not far from trembling. This Robespierre believes what he said! Beware, friends!"
The index-party says nothing of nationalisation, as the communists do, nothing of militarism as an ideal, as National-Socialists do, demands a government that is chosen in a democratic way (which seduces many - but not an old anarchist like me and a friend of Tucker, like you) and all which is dear to the heart of modern man: Price control, a supreme chamber of industry, which "controls" even canteens (page 3 of the pamphlet), and orders a "5-year plan" or a similar plan.
I believe the index-men to constitute the most dangerous party, index-money being the sole money and even the sole nonsense not yet tried in practice. About all other muzzles we already have experiences.
Only Free Banking can fight against the index-money-idea with success. Free Banking is the most opposite system to index-money as a forced currency and an "exclusive" currency. It leaves full liberty to all who are crazy enough to entrust the living standard and the economic future to the index-idea. They may try it. Private index-clauses shall not be prohibited under the Free Banking system. It leaves them also - - this is very important - - the liberty to give it up, if the system fails, what it will certainly do within four weeks after its acceptance.
Index-men know or feel that, if the money-apparatus is in their hands, they will dispose of the country's production as absolutely as Stalin disposes over Russia's production, and not only that, after a few months they dispose of public opinion, the religion, the standard of life and all details, quite absolutely.
Very truly Yours - signed: U. v. Beckerath.
(J.Z.: Gesell was close to anarchism. Alas, most of his followers did not follow him in that. - See his paper: Der Abbau des Staates nach Einfuehrung der Volksherrschaft (The Demolition of the State after the Introduction of Self-government for the People), 1919, reproduced on 32 pages in PEACE PLANS 957.
I do believe that one should clearly distinguish between those index standards which are intended only for optional, competing and privately or cooperatively issued currencies, which are refusable and discountable and those index standards meant for an exclusive and forced currency, i.e., one with compulsory acceptance and a compulsory value. The former are a problem at most only for those who voluntarily use them. The latter are a problem for all who are forced to use them. As a mathematician and statistician, who had himself calculated index numbers for the "Festmark Bank" and possibly others, B. objected only to the tyrannical aspects of many of the index currency advocates. E.g., Gesell wanted to "stabilise" the general price level by adding to or reducing the volume of the circulation of an exclusive and forced currency, and others, having only legal tender currencies in mind, do not want to abolish their monopoly or their coercion, but merely to "improve" or to mitigate (as in Israel) their effects by "stabilising" this monetary despotism via one index or the other. The governmentally and bureaucratically "calculated" CPI (Consumer Price Index) in Australia is largely the result of political pressures, that want to let the inflation of the Australian paper money appear as low as possible and thereby also reduce the governmental expenses for e.g. old-age pensions, determined by the official CPI. While there were still some price controlled consumer goods, like e.g. bread, eggs and milk, their controlled prices were included in the official CPI! I do not trust the present one, either, after these price controls were removed. The Australian CPI is used as if it were the only possible index standard, although there are hundreds, if not thousands of ways to determine an index - and the results are often quite different. If at least the results of other index calculations were also published, then the official one could at least be compared and thus earn, if it largely agrees with the others, some trust. As it is, every shopper observing the development of those prices which are significant for him or her, will tend to distrust it, highly, in my case. However dishonestly it may still be compiled, it at least does partly adapt my nominal superannuation income to the continuing paper money inflation of the Australian dollar. - Professor Rittershausen once explored the origin of index figures, by questioning those who had supplied the original figure for them, by filling out corresponding forms. He found out that the forms were usually filled out by junior clerks, who, more or less arbitrarily picked prices from a wide range of prices, to make their jobs easier. E.g., the prices of "potatoes" can vary according to the time of the year, their type and quality and their storage conditions by a factor of 20. So, which is the correct price for "potatoes" during a year? Rittershausen finally concluded that most of the figures provided were quite useless for the determination of a really representative index. They were answers to questions like: How high is up? and: How low is down? What is the price of an average toothbrush, tennis racquet, wrist watch or pair of shoes? There are xyz qualities and prices for each of them. - Then there are also differences of indexes in different spheres. For instance, agricultural prices may develop quite differently from the prices of mining companies and those of factories and for different enterprises and individuals these variations have a quite different importance. No single index can do full justice to all people and all their contracts. - J.Z., 16.1.03.)
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14. 4. 1949. Your letter of 1. 4. 49.
Dear Mr. Meulen,
your statement is true that German Banks assisted industry much more with long-term loans than the English Banks did. The point deserves attention. The standpoint of German Banks was: If we get deposits, we may, without economic dangers, lend them out for long term credits and at the same time promise the depositors to repay the deposits with a notice of - - say - - three months or 6 months. It was legally prohibited to proceed in this way. The Banks evaded the prohibitions simply by demanding a promise from their debtors that they would repay their loans in 3 or 6 months, after the banks demanded repayment. Of course, the banks knew very well, that if a factory had transformed the bank loan into machines or buildings then, in practice, it could not repay within 3 months or 6. But the banks said: The clause to repay within such a short period is a mere formality. "In practice" we always get new deposits. If one of our creditors gives notice, then there are already two others to replace the money called in by the first creditor. The standpoint of the banks was not quite as frivolous as it seems, There was a silent agreement between the Reichsbank und the great commercial banks to grant at any time loans to the Commercial Banks for the amount of the loans granted by the commercial banks to the factories, simply taking the loans to the factories as security. The Reichsbank could easily promise (not openly but tacitly) to grant credits for any amount to the commercial banks on this basis. The Reichsbank had the power to print the means of payment if such means were short. So the banks and every businessman thought the commercial banks to be secured by two props:
I.) the constant inflow of new deposits and
II.) the reinsurance at the Reichsbank.
But, as our Schiller says in his famous "Die Glocke" ("The Bell"):
"Doch mit des Geschickes Maechten,
"Ist kein ew'ger Bund zu flechten,
"Und das Schicksal schreitet schnell."
("But with destiny no eternal alliance is possible. And fate advances rapidly.")
The crisis of 1932 came. Suddenly, the inflow of new deposits stopped. And nearly all creditors of the banks called in their money. The banks demanded the money from their debtors. The debtors answered:
Be so kind as to tell us: How can we transform machines, raw materials and buildings, within a few weeks, into money? What we want are fresh credits to pay our workers and continue production. None of our customers pays or can pay and all orders are cancelled.
(The very day before the banks were closed, a factory owner came to Fuerstenberg, the manager of the Darmstaedter Bank and demanded a credit of 50, 0,00 Marks - - a small sum for the great Darmstaedter Bank. Fuerstenberg said: Go to my neighbour, the Deutsche Bank. They are "lame ducks" no less than we are - but they do not know it as yet!)
Seemingly all that was against the general economic experience. But if the gentlemen would have known the history of their profession, they would not have been astonished. They would have remembered the crisis of 1907, that of 1901, that of 1873, etc. and would have learnt that a crisis a intervals of 7 - 10 years was, quite normal. But if anyone, author or personal acquaintance, remembered them, their answer was: In those years there were quite different conditions. The observations of these years cannot teach us anything.
(Indeed, they were unable as well as unwilling to learn from them. - J.Z., 15.1.03.)
In 1932 the situation in Germany was aggravated by the general distrust of the public towards the German Mark, not that of this year that of the years before.
If in 1924 or 1928 or 1930 anyone deposited with a German bank he said (this was often the case): Here you get a sum in Reichsmark. Please accept it on Dollar-Basis or on a Pound-Basis or any other Basis that is not German. "With pleasure", answered the banks. They promised not only to repay the amount on notice not in Reichsmark but in Dollars, Pounds etc., as agreed.
In the years preceding 1932 there seemed to be no risk. The factories took the Reichsmark amounts on a Dollar basis as well as on any other. They also signed a promise to repay the loans in foreign money. They would also have subscribed to a treaty with the devil, as Dr. Faust did, if they would have got cash by such a treaty.
(If at the time of Dr. Faustus Free Banks would have existed, everybody would have asked Dr. Faustus:
But, my good man, why go to the devil??? Go to a Free Bank! You pay a little interest, but you keep your soul at your own disposition.)
Now the Banks came to the Reichsbank. Its President declared: If you jackasses would have promised Reichsmark to your depositors, then I could help you. I could print Reichsmarks and lend them to you. But Dollars, Pounds - - at the moment I cannot print them. (10 years later he could - - as it seems - - a dark chapter.) I cannot help you!
Then the banks did, what the normal European with normal mentality does in difficulties: They went to the government.
The Reichskanzler Bruening was no blockhead. He was an extraordinary man. From the Oberregierungsrat Dr. Munzer, who knew him very well, I learnt that if Bruening had studied a thick volume of documents, then he knew them nearly by heart after many years. The quickness with which he studied documents was astonishing. He gave several hundred signatures a day and knew at any time what he had signed. His character was far better than average. But - - of banking he did not understand anything.
The banks represented the situation to the Reichskanzler (Bruening) in the following way: There are numerous owners of accounts in foreign money. We hoped that they would not give notice all at the same time. But they did. Now we need many hundred millions of Dollars, Pounds, etc. Help us. The Reichskanzler, of course, misunderstood this as meaning: There are foreigners, who demand foreign money from the banks! Ah - - he shouted: They speculated against you and the German Mark, what a crime!!! Then he granted the banks a moratorium. And then we had the crisis, which was the true reason for the unemployment of more than 7 millions of men, of the avatar of Hitler, of the war, of the loss of my nice library, of your library, not less nice, and all other. (Did he here mean other libraries or other troubles? - J.Z.).
That was the end of the "liberal credit granting of German banks to the German industry from deposits."
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You are right: In times of crisis the distrust in banks is general and "my" banks will be no exceptions. But how works the general distrust on my banks? The public brings the standardised cheques at once into the stores, buys anything, disks, canaries, chess boards, pine apples and apes, while in the stores not tied to "my" banking system not even matches are sold, because everybody keeps his money in the pocket. My stores get a booming business and say: Every month such a crisis end we are all millionaires!
In one of my last letters I mentioned already this special feature of my banking system.
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Very truly yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 15. 4. 1949. Your letter of 1. 4. 49.
Dear Mr. Meulen,
concerning duty, perhaps Hamlet's word contributes something to our discussion:
"To be honest, as this world goes, is to be one man picked out of ten-thousand."
Of 10,000 men 9999 do their duty for no other reason than to avoid the contrary of pleasure. But the 10,000 th man should not be confounded with the 9999 other fellows, like a diamond should not simply be subsumed under the notion "stone". It is a stone, certainly, but this property is not essential if the question arises: What distinguishes it from other stones?
What you say about men with an altruist sense is true. But - - as Kant remarks in his "Foundation of the Metaphysics of Morals" - - there are men, whose altruism is much less then average, may it be by their original nature, may it be that they have arrived at a certain contempt of men after a life of much experience and hardship, and who, nevertheless, are very dutiful. Old soldiers are not seldom of this kind, also statesmen, whose character seems more cruel than altruistic, but whose sense for duty nobody doubts, say Robespierre, Pitt or Bismarck.
How is their sense for duty to be explained? By the feeling of satisfaction in every man, fulfilling his duty? Kant appeals to every man's own experience and asserts: This satisfaction accompanies the fulfilling of duty, but it is far from being so delightful, as to induce a man to fulfil his duty under circumstances as they pressed on - - say - - Thomas Morus (Moore - J.Z.), who preferred death to a violation of his duty - - not as subject but as man. (He was too enlightened for a religion could furnish him motives.) Morus' pleasure in fulfilling his duty certainly was so moderate as an agreeable feeling can be. Here lies a very deep mystery. The gregarious nature of men is not sufficient to explain it.
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I expect with great curiosity Babcock's pamphlet on duty and thank you beforehand for its kind transmission.
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You are right in 9999/10 000 of all cases that arise in practice.
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You are right: 4 1/2 d per ounce for printed matters is too dear, at least in the case of Berlin. The post office tries to justify such postage by the necessity to utilise the air transportation possibilities of the aeroplanes. But there are better possibilities to utilise them. At the 14th of April it was published that during the last 24 hours 742 aeroplanes had carried 5252.98 tons to Berlin. (I think they meant: in 742 flights.) 5252.8 : 742 = 7.1. There are aeroplanes of 7.5 tons capacity and of 10 tons capacity. I do not know in what proportion. But obviously, 7,1 tons per flight indicates that the room of the aeroplanes in not fully used. The weight of all letters and parcels for Berlin is in the average 5 tons daily. If every aeroplane would have carried besides its prescribed load 7 kilograms of letter mail, that certainly would not have been a great additional load. And if all letters to Berlin were quite free of postage, then the weight of all letters and parcels would perhaps be 10 tons a day, still no really large additional load for more than 700 flights. (Especially for outgoing mail, when the returning planes were mostly empty. - J.Z., 15.1.03.) But there is much ado for the small quantity of air-mail. All letters not expressively designed as air mail letters are sent by railway and through the Russian zone. The delay is often many weeks and much of the mail disappears.
The journals of Berlin attribute the air mail condition to the bureaucracy, whether German, English or American. If there were no bureaucracy, then there would be no postage charged during the blockade, neither for letters to Berlin nor from Berlin.
Very faithfully yours - signed: U. v. Beckerath.
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U. v. Beckerath, ……… 16.4.1949. Your letter of 1.4.1949.
Dear Mr. Meulen,
the defect in banking since 1844 is - - as you very correctly point out - - very serious. (1844 was a significant year only for English banking! - J.Z., 15.1.03.) Banking activities should not be tied to the amount of gold at any place; it is sufficient if the market value of bank notes is every day observed at the bullion market, simply by publishing the price of bullion in bank notes.
The quantity of fresh loans cannot be influenced by this valuation. W. B. Greene conceived that before we were born:
"Mutual money is measured by specie, but is in no way assimilated to it; and therefore its issue can have no effect whatever to cause a rise or fall in the price of the precious metals."
("Instead of a Book, page 232.)
These words alone should secure literary immortality to Greene. (The immortality that churches promise is a dangerous thing; Buddha teaches to avoid it; also Schopenhauer.)
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What you say of the bad supply with means of payment since 1844 is no less true. The mass of productive ability, suppressed since 1844, is probably more than 4/5 of the existing ability.
Without special social reform Free Banking will much more than treble the standard of living everywhere it is introduced.
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Money lenders take 20d % - 40 % p.a. and more. I had a table of Inwood from which I learnt of the enormous interest taken by money lenders. But: is the supply with capital by money lenders great, considered from the standpoint of the whole community? I would not be surprised if a statistic revealed that the capital supply by money lenders is less than 1 % of all capital supplied.
From an American work about Building and Loan Associations I learnt that if borrowers offer more than about 6% at the mortgage market, the offer of capital not seldom suddenly stops. There is an exception at the market of instalment mortgages. The public is not able to calculate the interest in instalment rates. An interest table, such
as Spitzer-Foerster's, Tables for Compound Interest or the solution of equations of a high degree would be necessary.
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(Currency Reform - J.Z.)
Recent monetary reform at Berlin. The right way to bring an inflated currency in order is explained, with much detail, by a German-Russian author: Jacob, Staatsfinanzwissenschaft, Halle, 1823. (Not 1923, 1 8 2 3!) Of course it burnt on 22.11.1943.
Jacob says:
l.) Repeal all restrictions for the free trade with bullion in every form, coins and any other.
2.) Let the price for bullion, coins, etc. be daily quoted at the exchange. At last - - probably already after some
days, at least after some weeks - - the relation between bullion and paper money will be stabilised.
3.) Restore the old laws by which every owner of bullion has the right to exchange it at the mint into coins.
4.) Repeal all laws that prohibit treaties, agreements etc. on any basis seeming apt to the parties, may the basis be
gold, silver, wheat, maize, wood, dung, chickens or anything. Do not omit from the repeal the wage
agreements.
5.) Once the proportion between the value of paper money and gold is at the exchange and in all parts of the
economic world stabilised then declare:
Taxes are now payable and fixed in precious metal but may also be paid in paper. The relation between paper
and precious metal is published for at least 3 months and is for the next three months the same as the quotation
at the exchange.
6.) Replace the paper money accepted for taxes by a newly printed paper money, which is nominally equal to
precious metal (for simplicity, say: gold). Example: The exchange quotes: 10 paper units are = 1 gold unit.
The receipt of the finance offices for taxes is 500 millions in gold and 10,000 millions in paper. Then burn that
paper, replace it by new notes with a nominal value of 1,000 millions and then stop every further action.
Let the worker deliberate with the employer about a new a basis of wages.
Concerning mortgages, their new value is every day to be read in the lists of the Exchange.
If a creditor had lent out 100, 000 paper marks or paper florins, then the debtor owes now so many paper marks as 50,000 gold marks are worth. It is a matter of the judges.
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In Berlin I would have proceeded in the same way if I would have been a dictator. At the loss of Berlin I am not. If I were, I would conclude a treaty with the people as, in Imperial China the officials (Mandarins) of the emperor often did (with the local merchants, B. said elsewhere. - J.Z.): Not