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MeulenBth section three
U. v. Beckerath, ... 6. III. 1950.
Dear Mr. Meulen,
Some points in which we agree completely in Free Banking are:
1.) The liberty to issue notes should be without legal restriction and should include everybody.
2.) The existing laws against swindle are sufficient to meet swindle in issuing notes.
3.) The right to refuse to accept notes should be as unlimited as the issue is. The observation of traditional manners and forms in business is sufficient to avoid misuses. (Example: If a landlord does not like the notes of a certain bank then he must say it seasonably, 3 or 4 days, or an the usage may be, before pay day.) Probably there will
arise a right, founded upon custom, as some years before in China - - with her numerous issuing banks and firms - - so that every creditor must accept "local currency", if it is not expressly and by agreement excluded.
(J.Z.: Development in China would have gone very different if most of its banks of issue would not have practised the metallic redemption spleen, too. - J.Z., 2.6.03.)
4.) The standard of value, by which the face value of notes is expressed, depends upon the issuer and nobody else. The issuer is obliged to express the standard's nature, on the notes, so well that no doubt can arise. (Examples: "The pound of this note is a bank note pound in the sense in which Mr, Meulen's book defines it. Or: " The gold unit of the face value is that of the bullion market of Liverpool quoted for one ounce. The last known quotation binds the banker." Etc. Silver, Corn, gas, an index, nothing should be excluded, if it is defined so distinctly that no doubt can arise.
5.) The time of validity of a note should be limited in a distinct manner.
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It you agree, then we are d'accord in all what is essential.
There seems to be a difference in predicting how the public will accept the notes.
I say: If we have complete liberty of issuing, there will soon be a state of affairs very different from that prior to 1844. At that time money, including notes, was scarce. The bad prescriptions concerning redemption allowed only a very restricted issue. The option clause protected, to a certain degree, the banker, against losing his store of gold coins or silver coinage, but did not take from him the obligation to keep such a store and to limit the issue correspondingly. But if notes are no longer scarce, then the public will, a short intervals, try to utilise the notes. (J.Z.: I suppose, he meant: by converting them into rare metals or redeeming them in rare metals, at least for some amounts they want to save in this form. - J.Z., 22.3.02.) Keeping notes (no longer scarce - J.Z.) for a long time in their pocket will then no longer be common usage. If then the possibility to so utilise the notes in not (very) convenient, then the public will refuse the notes.
It will and must be the banker's aim to arrange for many places where the notes are accepted at par, even if their quotation at the market is below par. In practice, there is only one possibility: The banker's debtors must all be obliged to accept the notes at par. (This is no innovation: Free Banking, page 81, lines 5 to 7 from the bottom.)
You say: The public will keep trust in the banker, and one effect of that trust will be, that the notes are used exactly as now cash is used. There will be no tendency to bring the notes soon back to the banker - - directly or indirectly via the banker's debtors.
I say: If the banker grants long-term loans (with his notes - J.Z.), he and his debtors are unable to realise the notes quickly, say all notes within a few hours. But such a necessity must be taken into consideration.
You say: Such cases will not occur and if they occur, the Bth-banks will be in no better position than my banks. That needs no proof.
I say: If the public, in a case of "panic" has notes that it cannot utilise, the note-holders will come to the banker and ask him, what to do. The case will not be quite desperate. The banker gets interest from the debtors and, therefore, he can say to the note-holders: Good people - - I convert your notes into gilt-edged securities bearing interest and convertible at my counters, or into securities of my debtors for goods, services or payment of debts, also into cash or other notes, if [and to the extent that - J.Z.] I get such means of payment. If the interest is high enough the public will, probably, be content. For secured high yield certificates there is always a demand. In the worst case, the owner of the certificate will exchange it against local currency, suffering a discount of 2-5 %, but - - if the interest is the usual - - very probably not more then 10 %.
My banker says from the first: Why the roundabout way? I begin by selling such certificates, just like Swiss bankers still do today (Bank-Obligationen), as everybody knows, who was at Basel and saw such Bank-Obligationen in the bank's display cases, ready to be sold. (3 1/2 % interest and a 5 year term were usual when I saw them in the year 1926.)
The difference will be: My banker never has any trouble with the public. Your banker goes the right way, after a considerable trouble with the public, which will even lead to some distrust against him and, in any case, might prevent him from issuing notes the future.
You say: The contrary will occur. No certificates will be necessary as the consequence of a run. But that people buy security certificates and use my own notes as a means of payment may occur, although not often.
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There are still some other points to be observed, which I tried to explain in several letters, one of 29.12.1948, and others.
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My system works only if existing goods are to be exchanged for other existing goods.
The intention of your system is: to exchange future goods for existing goods.
I say, that is easily possible with the help of interest.
You say: Interest may be replace by the trust of note bearers in the banker.
I say: The exchange of present goods for other present goods is essentially different from the exchange of future goods. For the former a transportation (railway, ship, car, etc.) is wanted, and the bank finances that.
The exchange of future goods is a "book"-affair.
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Our main difference seems to be that I believe in frequent "runs". (Their possibility or likelihood, even their desirability in B.'s system! - J.Z.) (The short expression may here be used, although the meaning is somewhat different from the word's former meaning). You don't believe in them.
Both of us do not know the future. But, judge for yourself: Who is "on the safe side"?
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Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 11. III. 1950.
Dear Mr. Meulen,
I thank you very much for:
1.) City Press of 24. II. 50,
2.) The Weekly Register of 24. II. 50,
3.) The Economist of 23. II. 50,
4.) "The Crisis of Liberty" by David Douglas,
5.) "The Individualist", Danville, Virginia. August 17, 1945 (No. 60),
6.) A cutting from The Times of February 21, 1950 ("Policy for Industry")
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Every issue of the City Press is interesting. A bad news I learn from issue of 24. II.: Mr. Alexander, whom I consider as a champion fighting on our side, although he demands redemption of notes, on demand by the bearer, lost the L 150 deposited by him a candidate for election. He could have used the money for better purposes.
On the other hand, I am glad that such a champion will not be occupied by non-productive parliamentary work and
can now fulfil the task for which nature has destined him: Fighting against the present state of English money. (If Alexander would know that a paper money without cours forcé is better than one not subject to the daily renewed investigations of a really free market, that could produce surprising results, simply because his tribune is such, that every Englishman must hear him.
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I learn from the issue that Chilean merchants sell dollar coins to Americans for the price of 47 dollars an ounce. Both governments, that of Chile and the USA permit that trade. In realty that means, I think, that the USA-Government confesses a depreciation of its paper dollar in the ratio of 35 to 47.
People like the Professor Spahr in New York should know the now paid price for gold coins and try to prove that, nevertheless, a redemption of paper dollars in gold coins, on demand of the bearer (which they desire) will be technically possible (at the old rate of 35 dollars per ounce - J.Z., 24.2.03). I think it impossible, in spite of the great store of gold in the USA.
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Although both - - Spahr and Alexander - - demand redemption at sight, there is a great difference between them. Alexander is on the way to our money system. Spahr is a strict defender of "exclusive currency". If Alexander would read your book, he very probably would become an adherent of Free Banking. Spahr certainly would not. Both are convinced that they are demanding the best for their country.
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The Weekly Register is as bad as it is interesting. At page 6 Peter Marriot says: "It is of no use to return to a Christian form of society unless the fundamental spirit pervades it."
What kind of spirit inter alia is required, the Distributionists may learn from the emperor Constantine, who is the real creator of Christendom - - a religion which already at his time had not much to do with the reforms proposed in the Evangiles. Peter Marriott seems not to know that the emperor (one of the greatest rascals of his time in private life, but a very intelligent man, who understood the art if governing), abolished the monetary system of the Caesars, whose unit was the Denar, a coin endowed with cours forcé and whose value was determined by the Caesars according to the requests of the public treasury. Constantine renounced the power of devaluating the Denar, abolished the name and replaced it by the "Solidus". 1 Solidus was 1/72 of a Roman pound, so that it contained 4.55 grams of fine gold, without regard to the fact whether gold coins were obtainable in the economic sectors of the debtors. Perhaps, at the time of Constantine, the value of gold was, to a high degree, dependent upon the annual supply of gold by the mines. (Some contest that and assert that the store of gold in the Roman empire was too great to be affected by the annual supply.) At any case, the system was honest, although imperfect, and no longer at the mercy of the Caesar. That progress was enormous. I am convinced that, at that time, many people said: The religion of such an honest Caesar must be good: let us accept it!
The Distributors do not talk about re-introducing honesty into the monetary system!
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Economist. News from the race fights in South Africa. The Whites in South Africa do not consider
1.) that their number is only about 3 millions,
2.) that the natives number about 9 millions and, probably, much more, since statisticians are finding great
difficulties in counting the people. In many cases young children and women are not counted. (The old
superstition - - II Samuel 24 - - still prevails in Africa that counted people must die.),
3. That there exists a strong temptation for Indian governments to make a war against South Africa - - 400 millions against 3 millions, aided (that is certain) by 9 million natives. This war will occur before another 20 years are passed. (B. was not much of a prophet! - J.Z., 24. 2. 03.) Then the Whites may be glad when their the conditions for their race will not be much worse than they are now for the coloured, Indians and Negroes. I am convinced
that the new Babur in India and a second Cetewayo in South Africa are already born.
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There is an article in the Economist: "Anglo-German Talks". The problem of paying for English exports to Germany with German exports, could be easily solved if people would listen, for some minutes, to their own reason. If the German imports from England would be paid for by German certificates which stated:
We, the issuer, accept this Certificate for the value of 100 Dollars (or 100 pounds, etc.) if the bearer buys anything in our shop or at our store and pays with the certificate.
The Dollar value is determined by the relation of dollars to German Marks at the Exchange of London. -
This certificate expires 5 years after the issue.
then the English exporters, who brought goods to Germany, could sell the certificates to the English government and receive pounds. The government may then determine what to do with the certificates. It may buy, within the next 5 years, things really wanted in England and not provided by the English industry. Or it may sell the certificates to other governments, which do wish to buy useful things for their country and made in Germany.
Under this system a German competition for English industry is impossible and, nevertheless, both countries enjoy all advantages of an English-German commerce.
These certificates will be at a discount on the Exchange of London. This discount must - - of course - - be paid by the Germans. I think that the discount will never be greater than about 5 % and often will be less. The German railway money, at the Exchange of Zurich, was often at par with the German Reichsbank Notes and the discount was always small. (My library being burnt, I cannot tell you the exact numbers.)
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From the pamphlet "The Crisis of Liberty" I learn that there exists in London a "Society of Individualists". The pamphlet, so interesting it is, disappoints me very much.
The author does not see, that the basis of the present attacks on liberty is the compulsion exercised against the people and every individual to accept the paper pound note for a gold pound. If the paper pound would not be endowed with cours forcé, all would be alright. At the bottom of the beginning of British slavery is the cours forcé. Obviously, the "Society of Individualists" does not see this. Nobody in England sees that. The political, social and economic significance of the cours forcé was fully pointed out by Adolf Wagner, Professor at first in Russia and then in Freiburg and later at Berlin, in his work: "Die Russische Papierwaehrung" (The Russian Paper Currency), Riga, 1868.
(This work honours Adolf Wagner no less than the emperor Alexander II, under whose reign such works could be published without danger for the author. If now an author would write such things, he would at once brought to a concentration camp.)
Especially interesting for your would be Adolf Wagner's "Die Geld- und Kredittheorie der Peel'schen Bankakte" (The Theory of Money and Credit leading to Peel's Bank Act), Vienna 1862, which, at that time, was considered to be by far the best critique of that 1844 Act. Wagner shared your standpoint in what is here essential. Wagner's influence was so great that the Prussian wars of 1864, 1866 and the German war of 1870/72 were carried out without cours forcé for the paper money. When, after the war, a new paper currency was introduced, the $ 3 of the Banking Act of 1875 prohibited for every federated German State the introduction of a cours forcé. Here also the influence of Adolf Wagner and his adherents was visible.
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The "Individualist", Danville-issue, says:
"There can be no inflation without increased credit."
The inflation of John Law in France, the Assignats-Inflation, and many others do prove that increased credit is by no means an essential element of inflation.
The American Individualists are men of good will - - certainly - - but they do not see things as they are.
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Kong Foo Tse was asked: What law would you enact as your first? His answer was: A law which prohibits the use of well introduced words in a new sense.
If Kong would live today, he would punish people, who changed the original meaning of the world inflation and took it simply in the sense of dearth (or dearness - J.Z.) and also those, who changed the original meaning of the world "socialism" and took it simply in the sense of State capitalism.
Originally, inflation meant an increase of the volume of fiat money beyond the amount that could at any time be used to pay taxes with. Socialism originally meant replacing private ownership of means of production with collective ownership, cooperatives included. (Tucker, "Instead of a Book". Now the English do no longer possess a word which expresses these notions and by that they are unable to talk about certain social and monetary reforms and - - unluckily - - the most important of all. (Well, at least for certain forms of socialism they do have: "voluntary socialism" as well as "cooperative socialism". - J.Z.)
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Very faithfully Yours - signed : U. v. Beckerath.
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U. v. Beckerath, … 24. III. 1950.
Dear Mr. Meulen,
The best result of our discussion was for me the confirmation that we do agree in all that is essential and even in very many details that may be considered as not essential.
Your statement, in your book's chapter: "An Invariable Unit of Value" (page 247):
"In ordinary economic language these two factors of value, desire and sacrifice, are expressed by demand and supply",
has been overlooked by economists for its simplicity and because it is so just that it seems self-evident after one has read it. But it is a very far-reaching statement and. if applied to the problems of our time, it may put these problems into problems into a new light.
Also your statements before the quoted sentence and the following - are in strong opposition to all definitions of value known to me. Most authors confound "demand" and "desire" or overlook that desire is that which brings a genuine demand into existence.
(In Prussia until 1816 and in other European States during the first decades of the 19th century, every family was obliged to buy a certain minimum of salt, if they desired it or not, and to pay the prescribed salt price.
Here the difference of demand and desire strikes the eyes (taste buds? - J.Z.) and seems to invite every economist to distinguish, in all prices considered, the "natural" element - - that is the desire - - from the others.
Your philosophy of price and value enabled you to criticise Professor Irving Fisher's "Compensated Dollars" so fundamentally, that this dollar should never have got adherents. The theory is now logically dispatched, and if the modern followers of Silvio Gesell, Major Douglas and others would not be sinners against logic, they would become aware of their spiritual death. But, as the existence of all churches teaches, an awakening from this kind of death is a rare and difficult thing and requires not only help from heaven but readiness to accept the help, too. You quoted the Professor Sidgewick's example, where he made clear, that by a "tabular standard" - - the father of the "compensated dollar" - - very probably and in many cases - - rich people would be favoured and the Poor had to pay more than they must pay if the tabular standard would not be introduced. From your philosophy follows immediately, that by no correction, either tabular standards or compensated dollars, may become just systems.
Modern adherents of the index number standards are the most fanatic supporters of modern "exclusive currency" - - to use W. B. Greene's suitable designation - - with its central banking and its severe punishment for using other means of payment than the authorised ones.
(J.Z.: Inventors or fans of special systems like to force everyone to use it. They are convinced that they are the best possible solutions and that, consequently, everyone, in his own best interest, ought to be forced to submit to them. They also manage, like religious believers, the fact of many different solutions being offered and that, therefore, the likelihood of their own being the best one, is objectively rather small, regardless of their own convictions or faith. The great risk of utilitarian actions, made with the best intentions, but quite ignoring the rights and liberties of other people, who do not agree but dissent. Only sufficient tolerance for tolerant actions can finally dissolve this problems of various idealists, true believers, revolutionaries, reformers and innovators fighting each other and the conservatives or status-quo-preservationists and reactionaries. To each his own - or: panarchies for all! Let them commit their wrongs and mistakes only among themselves. And let them benefit directly and immediately only form their own rightful and rational actions. - PIOT, J.Z., 24.2.03.)
(In Germany the supporters of index currency call themselves "Freiwirtschaftler", that is "freedom-economists", an expression created by Silvio Gsell and, perhaps, the most misleading one ever used by a political party.)
Desires can be multiplied and increased to every degree that one may imagine. If it is true, that desire is the basis of value, then the last good which may be produced by the most improved plant still possesses value, if it satisfies a desire. That is in strong opposition to modern economic theory. It teaches, that the world's capacity to consume is restricted. It considers the possibility of artificially reducing production by State interference as one of the greatest advantages of government planning. You will remember, that the American government reduced the area under wheat in 1949 by 17% for 1950, fully recognising, that the now produced wheat was far below the desire of the world. But - - the USA Government stated quite justly - - the 17 % would be without value, because neither the USA Government nor other governments found a means to transform desire into commercial demand.
That the free and private issuing of notes is the first condition for creating the transformation of desire into demand, is known to no government of the world, because no responsible statesman - - it seems - - read your book. There you pointed out how easy it would be, under a system of free note issue, to increase the demand for labour, or, what here would be the immediate consequence, the demand for labour products, to a higher degree than the offer of labour.
Future generations (if any - - atomic bombs) will may, that this is, obviously, the natural state of things, for everybody is inclined to consume as much labour as possible and to offer in exchange as little as he possible can. If desire is permitted to appear as demand (*), then that part of the social question, which Karl Marx believed to be the most important, is solved. That part is the returning of the surplus (Mehrwert) to labour. Under your system, wages and other recompenses of labour will rise, as long as the demand for labour continues, until the technically possible maximum is attained, and that maximum is the present amount of wages + surplus + avoided loss (by unemployment) + gain by improving the industrial and agricultural plant.
It may be that the latter element is by far the most important.
( (*) J.Z.: I would like to qualify this statement: The satisfaction of the own desires can only be achieved through the issue of sound notes, covered by the own goods, services and credits, as others are able and willing to accept the own notes at par, or close enough to par, that is, to the extent that the others desire the own goods or services or have to pay back debts to oneself. To that extent the mutual and unlimited desires will be balanced against each other and also limited by the monetary and mutual demand for the other's goods services and receipts for debt payments. At the same time, it is true, that in normal times, so much has been produced and is offered ready for sale in goods and services, that the ability of consumers to purchase these goods and services, is limited by their ability to offer themselves and immediately or very soon equivalent goods and services in exchange, in a process of unlimited division of labour - assisted by tools, machines and automation etc. - and free exchange. Moreover, by their limited ability to e.g. consume food items and to use more than, say, a dozen pots and pans, watches, thermometers, toothbrushes, cars or planes. The immense stocks of goods and services offered in every shopping centre, to the extent that they can be soundly and freely monetised, would constitute an enormous and so far unrealised monetary demand for labour, much larger than all the available labour could immediately offer in return and thus realisable only in fractions at a time, as far as turn-over credits are involved. [Beyond those amounts, their utilisation for investments in capital goods, by those willing to do so, can also be increased.] Unlimited desires of people, at least in some respects - how many have their own yacht and plane so far? - will keep people working and over-working themselves, to the limits of their abilities, while they will always be - - objectively - - free to limit their earning- efforts and their spending, reducing, rather than increasing their working hours. - J.Z., 24.2.03.)
By your system those classes, considered by Marx as exploiters, will become, in a short time, producers and, instead of consuming surplus, produce wealth for the whole community, and that without State planning and
concentration camps, but simply by setting free the economic forces that are already developed in society no less than the force to assimilate matter by digestion is developed in individuals and which works there all the better the less it is controlled.
(I think that part of social biology is very well pointed out in Bastiat's often misunderstood "Harmonies économiques".
(J.Z.: Marx considered not only the owners and exploiters of legally established monopolies as exploiters but all other owners as well, who do already now earn their living by management efforts or by making pre-done labour in form of capital available. Monetary and financial freedom and other economic liberties would merely do away with legally imposed monopolies - or leave only those which are freely and contractually agreed upon among volunteers. - J.Z., 24.2.03.)
The problem then to be solved consists in distributing the social product among the different groups of workers (the word taken in widest sense) as justly as possible. I think that the now hated labour market will solve this problem as it will solve the problem of abolishing exploitation and unemployment. Average people do not see that only a free labour market can solve such tasks and that the present labour market is not free. Merely the offer is free, the demand is restricted by the limited amount of the "exclusive currency".
(J.Z.: The use of the term "distribution" is misleading. At least the term "re-distribution" already indicates that some looting and loot sharing is intended. But "distribution" also applies that existing goods and services and properties are not already distributed. Under free private and cooperative property rights everything is owned and under freedom of exchange the owners are at liberty to exchange, and thereby distribute their products, services and properties as they please. No other separate "distribution" system is required than that of a free market, a market not only free for labour but also for exchange media, their value standards, negotiable capital instruments and, naturally, for all kinds of products, services, raw materials etc., for all capital goods, except those spurious and monopoly values that are only established by legislative interventions and impositions. - J.Z., 24.2.03.)
The great error of average people (to which belong politicians, ministers, authors writing in newspapers and "intellectuals") is to ascribe the bad effects of the present labour-market not to its restrictions, which they do not see, but to its very existence.
The superiority of your system consists in is philosophical foundation, which connects the essence of value with a technique to bring it into existence and to use it.
Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 25. III. 50.
Dear Mr. Meulen,
I reflected much on your question:
"What would happen, if the demand for metallic gold should become greater than the offer? Must not paper currency - - supposed to be at "libre échange"- - drop in value, the value expressed in gold?
My answer is: Your Bank-Pound Currency will, in this case, very probably drop, supposed that all commodities, goods and wages are priced in Bank Pound Units.
Here we agree completely, agree, too, in the opinion, that it would be a natural and economically not prejudicial process.
Another question arises:
What would happen? if
1.) all prices are expressed in weights of gold at, they were before 1914, one sovereign being the same as 7,988
grams of standard gold, 11/12 fine,
2.) all face values of the notes are expressed in weights of gold, too.,
3.) all debtors of the issuing banks are obliged to accept the notes at par in their business,
4.) the quantity of issued notes does not surpass the amount which, in the case of a panic may be exchanged, at
once, for goods and services ready for sale at the debtors,
5.) an absolutely free and uncontrolled bullion market is established,
6.) it would be permitted, for every possessor of bullion, to get it coined - - by the official mint or, as in China at
the time of the emperors, by private manufacturers. This freedom for owners of bullion was legally granted
before 1914. Every such owner, before 1914, had also the freedom to get medals manufactured whose
inscription was: 1 gram gold, 2 grams etc., although - - in Europe - - nobody used such a right.
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I think that several different cases must be distinguished:
a.) the demand for gold arises suddenly, for great quantities, but only for a short time,
b.) for a long time, so that, generally, the opinion prevails: This increased demand will be for ever,
c.) the demand arises among all people, say as a consequence of a new religion which requires for everybody holy gold vessels, gold statues of holy people, and such things,
d.) the demand arises among such people whose incomes are normally paid out in notes,
e.) the demand arises among people, who do not possess notes but goods, exchangeable for gold.
My opinion is, that a sudden demand for great quantities will simply remain unsatisfied. People will help themselves by debasing the fineness of gold and sell e.g. rings which contain 6/12 fine gold instead of 11/12. In inflation times that is the usual means to satisfy the demand for gold. (One of them, anyhow! - J.Z., 24.2.03.)
But I do admit, that there may occur extraordinary situations, where the increased demand is exercised by people quite willing to buy gold by a note of 2 grams face value, for which they obtain only 1 gram fine gold. That would mean, for a certain time, a depreciation of paper currency expressed in terms of gold weight. The time may vary from 1 hour (it will very seldom be more) to longer periods. I think that must be situations which, until now did not occur in history and are in themselves extremely improbable. But improbability is not the same as impossibility.
Please consider the following circumstance:
It the first possessor of notes - - say wage earners - - gave to gold owners two notes of 1 gram face value to obtain 1 gram of fine gold, so that in this transaction the note gets a discount of 50 %, the man who sold the gold is now interested to buy with the notes at the usual terms. The goes with the fresh get notes to a shop. He will insist that the shopkeeper will accept the notes at for their face value, that is at par. He knows that the loan contract between the banker and the shopkeeper provides for the shopkeeper's obligation to accept the notes at par, as long as he is a debtor of the banker. ("Free Banking", page 81, line 6 from the bottom.) So the time of depreciation of notes must be short. No businessman has cash in his pocket for long time. He is not inclined to loose interest. Consequently, he buys something or he deposits the notes with a bank. That this deposits will contribute to bringing the notes to par I will point out in one of my next letters.
But let me shortly remark that it is an old tradition in Germany (firstly used in Denmark, as far as I could ascertain) to prevent a discount of notes by offering, to every note-bearer, gilt-edged securities, bearing high interest, and which can be bought and paid by the notes at par, may the quotation be as low as imagined. At the time of the Civil War the USA Government used the same procedure. With greenbacks - - depreciated or not - - one could buy certificates of the same face value, bearing 6 % interest, payable in gold or in paper corresponding to the price of gold at the time of maturity of the interest coupons. The same was offered for the certificates themselves. Even for the German "Rentenbank-Scheine" of 1923 this procedure was still used. The number of certificates sold for Rentenbank-Scheine, which their owners believed to be depreciated or for which they feared depreciation, was very small, if I remember well, for only 15, 000 Rentenmark.
The bank, with which the notes were deposited, will hardly get rid of the notes, if they are not at par. Greene reports cases in the USA, where notes circulated at a discount without much difficulty. But at that time there were, in the little towns and villages, where the notes circulated, certainly not shops like Woolworth, where only notes at par are accepted. Artisans in villages may accept notes at a discount without much trouble.
I beg to write more about this matter in one of my next letters.
I forgot to remark, that if in a country creditors are entitled to demand gold coins, or the debtors promised to pay gold coins, and the borrowed money must be repaid and exactly on time, then a crisis arises, an extremely vehement demand for gold will be felt at every point of the country's economy, much more violent than the most extreme industrial demand may be. That demand is a quite artificial one. It may be satisfied, without any trouble, by a legal prescription, that the creditor must be content with paper, valued at a free bullion market.
In the whole of Asia, where no Western laws are introduced, creditors are not entitled to receive metal, but only "local currency", as was the term in Chinese documents. (Zander, perhaps, still possesses them. Please greet him cordially, if you see him.
In England such crises were several times ended by suspending the Bank of England's obligation to redeem its notes.
We agree completely, that credit should not depend on a stock of gold, and that an exportation of gold to its technical maximum should not prevent the granting of fresh credits, so as if no gold would have been exported. We agree also, that such a monetary system is possible and could easily be established.
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Aldred was not elected - - I think. A pity that he lost his L 150 1. He should have used the money to pay his debts.
"Mensch bezahle deine Schulden, ("Man, you have to pay your debts,
"Lang ist ja die Lebensbahn, For long is the course of life,
"Und du must noch manchmal pumpen, And sometimes you will have to borrow again,
"Wie du es so oft getan." As you have often done before."
- Heine, "Buch der Lieder" - Heine, "Book of Songs", tr. by J.Z.
The advantage for him, his friends and England is: He gets now the time to study the right of issue, to become aware, that it is a fundamental right, much more so than the right to strike and to riot, and, if a man like Aldred is convinced, then the true revolution made a step forward. (An anarchist, who never wrote about this right!) (Just like most others! - J.Z., 24.2.03.)
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I sent you the "Weltspiegel" of 8. I. 1950. There I underlined the news that the workers of the Maxhütte at Unterwellenborn (Thuringia) achieved a very considerable progress in revolutionary thought by calling the present Eastern system: "Plakat-Sozialismus". (Poster-Socialism - J.Z.) The expression is excellent - - I think and deserves international spread.
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You spent much money and three days of your rationed time to have intercourse with me! If I say merely: I thank you, it would not be enough, but I cannot say more. What consoles me is: We did not lose our time. Still three or four years of health or at least of activity and we will produce something worth to be known.
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Very faithfully Yours - signed: U. v. Beckerath.
The "Individualist's" February issue arose much interest among my friends. If you would send me still another copy or two, I would be very much obliged to you.
Bth.
(Alas, he didn't even have a photocopier, far less microfiche reading machine, a computer and scanner! - J.Z., 24.2.03.)
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U. v. Beckerath, … 26. III. 50.
Dear Mr. Meulen,
let me add to my remarks about monetary demand for gold in my letter of yesterday, that this demand was rarely really satisfied, at least not in the last decades of the old style gold standard.
For an interest of 7 % or more (in the years 1857 or 1873 for an interest of 1 % daily) creditors were ready to defer their claim to gold. Thus was satisfied the creditor's real desire, and that was not gold but profit.
If foreign creditors' claim to gold must be satisfied, it was mainly because, before the days of cable telegraph, it was impossible to deliberate with them. The demand for gold arrived - - say - - at the firsts of August and the day for paying gold was the first of September. It was not sure, that an English banker would get an answer, before the first of September, for an offer to pay a high interest to the American creditor for deferring his claim.
After the cable was in use, the shipping of metallic gold merely for monetary purposes became relatively rare, although it occurred from time to time by imperfect arrangements of bankers. These things were pointed out in a good book of the late Professor Liefmann at Freiburg, "Geld und Gold", printed 1918. (burnt.)
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If a commodity is made the basis of a monetary standard, then it wins new economic properties not observed before it was made a standard. The commodity may be gold or silver or corn (as in old Egypt) or cowry. After the good in made a standard, that is: after prices are expressed in terms of the good (weight units of the good) it profits from the fact the fact that all sellers tend to sell today for the same price as yesterday. This tendency is very strong.
The tendency to sell cheaper than yesterday is by far not so strong, but it is not zero. It arises merely from competition. (Or, expressed more exactly - - as Marshall taught: for the purpose of making selling easier, and this applies to monopolists as well.)
A little stronger is the tendency to sell at higher prices than yesterday. But the strength of that tendency is generally overestimated by average people. I apply to your commercial experience.
The same is, correspondingly, true for buyers. Their main tendency is to buy for the same price as yesterday. Their pressure for a lower price is not zero, but not strong and hardly felt at shops.
Their resistance against a higher price is much stronger and is felt at the shops. Shops are very unlikely to raise prices, as wholesalers know well. (Unless they are forced to do so by the continuing depreciation of the forced and exclusive paper currency. - J.Z., 24.2.03.)
The tendency towards a stable price level is the stronger the more persons are involved. It is a well known statistical fact, that shop prices are pretty stable for years, even when wholesale prices for the same articles vary much. The curve of index-numbers of retail prices offers a shape quite different of the curve of wholesale prices expressed in index-numbers.
Gold as a commodity varies much in price as a wholesale commodity (although less than every other good - - except [Professor Irving Fisher found that out] carpets [!!] ). It varies much less in price as a commodity sold in shops - - as rings, watch cases and such things. It can hardly vary in price if every owner of gold bars is permitted to coin the bars and so transform his gold immediately into purchasing power.
If gold is not the standard of value, that means: if prices are not expressed in weights of gold, the gold traffic concerns only a few persons, and therefore the resistance to price variations is relatively small, although it may be great, compared with the resistance other commodity prices find. But if gold is made a standard, so that prices are expressed in weight units of gold, every adult is concerned in price variations of gold to the extent of his income.
If in England prices would be expressed in terms of gold, England's 40 million adults (payers) would be interested every day for an amount of several shillings that the value of gold (the general price level) remains as stable as possible. Now, while prices are expressed in paper pounds of the bank of England, there are only (about) 5,000 persons immediately concerned about the price of gold every day. About 2,000 persons marry every day and buy rings, and about 3,000 persons (I estimate) buy golden plates, jewellery, golden watches, etc. The average amount daily sold may be, per sale, 5 or 6 pounds sterling.
The difference in economic resistance to variations in gold value may be seen from that estimation. Better statisticians than I and in a situation to get better information, may propose other numbers as a basis for estimates. But the principle which I want to explain is, perhaps, already clear.
By becoming a standard of value, gold plays the role of a retail sale commodity in whose price every adult is daily concerned and all what I said about the prices of commodities daily sold in shops, to a great number of persons, applies to gold if it is a standard of value. (The standard of value or the most widely used standard of value. - J.Z., 25.2.03.) Gold does not longer play this role when some other good, such as the paper pound of the Bank of England, is made the standard of value.
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The tendency of prices to remain as stable as possible, is to be observed even in times of big inflations, like that in Germany from 1914 to 1923. Although prices did at last varied daily and to a great extent, on most days they varied less than would have corresponded to the increase of paper money. Only from time to time there came a sudden rise by which the former resistance of the public was balanced. At the 23rd of October 1923 prices of victuals rose by 300 % in the course of the day. Severe riots broke out in the North of Berlin.
(J.Z.: He should also have noted that towards the end of that Inflation and in the expectation of further inflationary price rises, prices did often rise faster they the output of the note printing presses. This led to deflationary phenomena in the middle of this galloping inflation. But for long periods they limped behind the output of the forced currency. Towards the end it was no longer an exclusive one, since many emergency currencies were issued, with or without approval of the authorities, some of them on a gold basis. - J.Z., 25.2.03.)
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To every good chosen an a standard, gold, silver, the paper money of a bank, an element is attached which contributes, to the stability of its value, an element which was not attached to it before it was so chosen.
If gold would be chosen, then that element would by far outweigh all economic properties due to the fact, that the production per capita and year is at present only a few grams. (At this moment I have no statistics.)
The same would apply to silver. I see no reason why silver should be prohibited for people like Indians or Chinese, as a standard of value, if they or a part of their population (a commercial body in the sense of Jevons) desire to use it.
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The technical maximum of economic freedom will reveal - - by competition - - the best standard of value, that is the good, in terms of which other goods may be advantageously priced.
The possibility, that the paper pound of a well-managed bank is proven to be that good is by no means excluded and it should always be open.
The Egyptians curse for all people, who do not agree: "May their soul be as restless as the hat of a German."
Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 27. III. 50.
Dear Mr. Meulen,
If gold or silver or cowry are made a standard of value, that is: prices are expressed in weight units (or, in the case of cowries, simply in numbers) of these goods, the purely physical element of these goods is quite overwhelmed by the thus newly acquired economic and even social properties. The physical element may contribute in the case of gold (and, perhaps, of silver, too) to variations a proportion of 1 % or so - - I estimate. My assertion is based on the fact, that even at times of such an increase of the gold production, that the increase right after the discovery of America was very small in comparison to it, this increase was, nevertheless, several times correlated with a sharp decrease of prices.
(In the 80's and the 90's of the 19th century. The year 1883 - - others say the year 1895 - - was the year of the 19th century when gold's purchasing power was at its maximum. At that time the gold production was far greater than e.g. at the time of the discovery of the Californian gold fields.)
My assertion is also based on the fact, that at those times, when a fresh supply of precious metals was correlated with an increase of the general price level, there were quite obviously other causes working than the increased supply with gold.
(Si omnes patres sic, ego non sic - - Abaelard.)
After the discovery of America, in the whole of Europe the streets were much improved, ships were built in great numbers and millions of people, who were before paid in kind (also free artisans and peasants), i.e., were no part of commerce, became buyers of foreign goods. After transport avenues were created, it became possible for feudal lords to sell corn at distant places, while before it was without commercial value and consumed by his serfs and his family. Thus the price of corn had to rise and it would have risen even if no fresh gold would have been sent from
America.
Roscher says, that the art of salting herrings, invented by the Dutch Beuckel (in German still: einpökeln) caused an enormous economic revolution and was the real cause that the economic centre of gravitation wandered from Italy to Holland. By that art the people of Holland and other countries at the northern seas were suddenly able to buy goods, such as corn, which before had hardly any price.
(J.Z.: Elsewhere B. pointed out that it also caused the defeat of the Spanish Armada, whose high-placed guns could not be lowered enough to hit the majority of the English vessels, converted fishing vessels, which were low in the water, but whose guns could easily reach the vast bulks of the Spanish ships. Most history books do not stress such interesting details enough but rather engage in general speculations. - J.Z., 24.5.03.
Generally overlooked, by average economists, is the role of the fairs as clearing institutions. Roscher reports that at the fair of Lyons, on the clearing days, an amount of about 25 million ducats was made good by clearing. (The technique seems to have been better than the technique at the clearing house in London, which Jevons describes.)
From other centres of exchange no data are related. (As far as I know.) I am convinced, that during the Middle Ages the proportion of trade performed without cash was hardly inferior to the proportions of our time. If that would be true, then an increase or a decrease of the gold or silver supply would not have been of much influence upon prices.
The increase of the price level from about 1848 to 1857 is generally ascribed to the supply of gold from California. But the harvest of these years were mostly bad and the year 1855, with its extreme cold (4/5th of all birds in England died - - says Darwin) was decidedly a year of famine. In Germany - - e.g., the potato-harvest was as bad as the corn harvest. Mortality increased and natality decreased.
In Prussia there were more born than dead, per 1000 in the population:
(Statistical Yearbook for the Prussian State, 1913.)
1845 13.5
46 9.6
47 4.4
48 2.2
49 11.8
50 13.5
51 13.9
52 6.9
53 8.1
54 8.7
55 3.9
56 8.6
57 10.4
58 11.9
59 14.2
I do not believe that the supply with Californian gold contributed more than about 1 % to the increase of prices in the 1850's.
Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 28. III. 50. Your letter of 8 II. 50.
Dear Mr. Meulen,
Paying for German Imports. The possibility to pay for imports depends inter alia - - but essentially - - upon the prescriptions existing for the method of paying. Belgium is free concerning the methods. For Germany exists a code, whose weight I estimate to be at least one pound avoir du poids. Only a few people know all prescriptions. It is their job to know and to apply them. The more complicated the prescriptions are, the higher is their pay.
In German papers I read that smuggled goods (a very great part of the imports as well as the exports) are paid without delay and in a manner so that the foreign merchants are content. These methods should be studied.
The best manner to pay for German imports would be by Milhaud's purchasing certificates. (I refer to my former letters about these certificates.) You say - - and you are right - - that such purchasing certificates will be at a discount. But to what percentage can the discount grow?
Suppose a certain German commodity - - say a medicine, for which there is a demand - - can be paid for in Germany
a.) by 1,000 Dollars.
b.) by 4,200 Deutsche Mark West,
c.) by a Milhaud Certificate, face value 1,000 Dollars, on which is stated:
This Certificate is accepted for the value of 1,000 USA Dollars by XYZ, manufacturers of medicine,
if used as a means of payment for buying medicine within the next 5 years, etc.
(I refer to Milhaud's publications and my own in the Annals of Collective Economy.)
Value of Dollars as at the Exchange of London, New York, as the case may be.
Now suppose that a merchant at Montevideo is interested in buying the medicine. He can buy USA Dollars and buy the medicine with these Dollars. He can buy German Marks and buy the medicine with these Marks. He can also buy - - let me suppose - - purchasing certificates of a nominal value of 1,000 Dollars at the Exchange of London for 980 Dollars. Do you not think that he will do the latter? I think, that he will do it. If I am right, then the discount will not greater than 2 %.
The question arises, whether the German medicine manufacturer would not calculate higher prices if he knows, that his purchasing certificates will always be at a discount of 2 %. I do not think that he will have to. By paying part of his own expenses in such certificates will save him money and, probably, more than 2 %. Also other expenses of selling (advertising, etc.) are usually much greater than these 2 % and he does agree to bear these expenses but he should be unable to bear the 2 %? (Yesterday I read in an Australian paper that the Australian chicken grower gets only 20 cents for a kg. of chicken grown by him, while in retail they are sold for at least about $ 2 - 4 per kg. As high are the sales costs compared with the production costs, under present conditions, in at least some instances. - J.Z., 24.2.03.)
But concerning principle you are right. The possibility to use Milhaud Certificates does depend upon their discount. A discount of - - say - - 50% would make their use impossible if it prevailed for a long time (say, 6 months) and often.
(J.Z.: Here, too, the opposite of the popular form of Gresham's Law would prevail: The good monies would drive out the bad ones. As good ones would in this case perceived the ones with some small and regular discount but not those with a large and lasting or irregular discount. - J.Z., 25.2.03.)
The question arises, why did not the banks' debtors buy thed depreciated notes or borrow them, with the intention to repay their debts with them?
Say, the discount has been 10 %. Then a debtor - - say, a manufacturer - - could borrow the depreciated notes for an amount of (say) 100 L face value and 90 L market value. It the interest at the time of this transaction was 5 % p .a., then the manufacturer had to pay to his creditor, after a year, 95 L in cash. He pays, with the borrowed notes, at once his own bank, which the bank must accept for the face value of 100 L. The pro-fit of the manufacturer is obvious.
The desire of the manufacturer to repay his debt to the bank is diminished if the debt is a long-term debt.
I assume that the year 1846 there was less an over-issue than too much liberality of banks to grant long term loans (in their own notes - J.Z.).
If the archives of the banks were still preserved, one could get better information on the true nature of the crisis than is now possible.
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Silvio Gsell. The main error of Gsell is: He did not know or consider that the right of issuing notes can outweigh all effects of the most exaggerated hoarding, provided, that the country's creditors (landlords, workers, etc.) are not entitled to claim hoarded "exclusive currency".
The true nature of the Wörgl experiment I tried to explain in my book: "Does the Provision of Employment Necessitate Money Expenditure?"
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Meeting inflation by varying the contributions to unemployment insurance. (Proposition of the Conservative Party.) Scientists should protest against the misuse of the word "inflation". Inflation means increase of forced currency beyond that amount which can be used with the same advantage as before the increase, say, by paying taxes. Dearness is not the same as inflation, even if it may be the consequence of inflation. In the case here in question the means would be of doubtful effect. One must consider that, probably, the poverty tax must be increased to the same extent to which unemployment insurance contributions are diminished.
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F. A. Butler should be quite silent as long an he did not read your book.
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The continued correspondence with Runge revealed a great error of R. He believes (or believed - - I hope) that for mere clearing purposes, nevertheless, some amount of cash (exclusive currency) is necessary. Many people believe that.
(J.Z.: They do not distinguish between the cleared amounts, for which, obviously, no cash is required, and the amounts which cannot be cleared immediately and easily, i.e., the balance, which must either be paid in cash or for which further clearing arrangements, in the near future, must be arranged. The not yet cleared balance could be carried forward to the next clearing date or opportunity. - Particular truths require the ability to make those distinctions which particular cases do require. - J.Z., 25.2.03.)
At the Nazi-Time this was the official creed of the party, that is, of those few, who were able to distinguish clearing from torturing Jews. You know the "Giro-Bank" of Hamburg. It existed for about, 200 years and was founded on this error. ("Der Mensch ist dumm", says Richet.) ("Man is Stupid.")
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In an article of the celebrated Pearl S. Buck, "Dangerous Errors about China", I read that the food difficulty of China, in normal times is the selling of the victuals, not producing them. China has plenty of victuals, says Pearl S. Buck, but in cases of dearth or civil war victuals become scarce as in other countries, too.
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Very faithfully yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 29. III. 1950. Your letter of 16. II. 50.
Dear Mr. Meulen,
Scots Indep. As long as Gibson does not formally and as a thing of first importance acknowledges the Scots Right of Banking, his movement is not worth to be kept together. If Scotland would be governed by Englishmen acknowledging the Scots' Right of Banking (that is: of issuing notes without cours forcé) the step of progress would be like that from Darwin's original apes to Walter Scott's heroes. If Scotland would be governed by Scots, denying this right, then there would, very probably, be no progress at all.
There seems to be something tragic about free banking propaganda, you say.
"Alles Entscheidende geschieht trotzdem", says Nietzsche, who said many good and true things, although he was a bellicist. (Everything decisive happens - in spite of resistance. - J.Z.)
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Truth does not yet see the last consequences of Free Banking. Therefore it surprises sometimes with reactionary opinions. But you may take the editor's remark as a confirmation of my assertion in one of my letters:
Generally people think that Free Banking is a mere technique of banking. They would tremble if they knew that it is a claimed right. ("Du passé faisons table rase, foule esclaves debout, debout", that means Free Banking!!!) Tucker thought that the most revolutionary action possible at this time is the issuing of notes in spite of the laws prohibiting such an issue. For his time Tucker was in the right.
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Zwangskurs.
Your opinion is: Banks are able to grant loans - - payable in notes - - for a greater amount than the value of goods (services and credits - J.Z., 25.2.03.) at their debtors.
I say: They cannot, because at short intervals the public will try to get rid of the notes and will revolt, if people cannot buy for the notes goods, without delay and trouble.
Consequently, you take the country's resources into consideration.
I say: That may be a thing for granting credit in general, which is essentially different from note credit.
You think about the possibility to grant loans payable in notes, to such an extent, that the price level is rained.
I assert that such loans are practically impossible. If prices begin to rise, the public gets suspicious, goes to the shops and buys goods for its notes. If the public finds difficulties in buying them, it says: Never again will I accept a note of this bank! I have experienced that these bank notes are not to be realised. That has nothing to do with trust or distrust, the words taken in the sense of 1843.
Notes of the old style were, in England, 5 L-notes and in Scotland Pound Notes. Generally, most people never saw them, and their trust or distrust was of no importance.
The notes of future Free Banks will be in the same denominations as money is now. That changes all things fundamentally.
It may happen, that the note issuing banks of the future will get no deposits at all and undertake no deposit business, but merely work in cooperation with another bank doing deposit business. It that would be the case, then the deposit business will not be - - as you think - - a continuous test.
In my view it is the issuing bank's task to provide the means to pay wages (salaries & running expenses - J.Z., 25.2.03.) and so avoid unemployment (and many bankruptcies - J.Z., 25.2.03) in the cases, which occurred so often in earlier days: raw materials are at hand, orders as well, labour too, the machines are in order, but there is no money to pay wages with. Therefore, the workers must be dismissed, and once one factory has begun doing this, then a kind of economic chain reaction begins, which may affect more than 50 % of the country's workers.
To get long-term credit is no problem at times when there is no unemployment. The experience of centuries proves that.
Therefore, a note-issuing bank should not do long-term loan business, word understood in the sense of the old banking language. (I.e., paying out the loans in notes of the credit-granting bank.)
(J.Z.: The exchange of sound bills of exchange ["real bills"] for notes, with the bills representing goods already produced and sold to wholesalers and on their way to the retailers, is another matter, namely that of mere "turnover-credit", for a short period, essentially a clearing transaction within a "payment community", that is facilitated by a sound, optional and refusable [for all but the issuer and his debtor] paper currency issued for that purpose. Large bills, inconvenient for wage payments and consumer spending etc., are thereby replaced, through the "banking principle", in its most sensible meaning, by conveniently denominated bills of the same total amount. These banknotes are then, by their very nature, "clearing certificates" and should, perhaps, also be called that. - J.Z., 25.2.03. - They need no other cover or redemption than their power to mutually cancel the debts arising in any current division of labour and free exchange process within any particular payment community. Precisely because they are so immediately useful as "floating account certificates" or exchange media, in an ongoing mutual settlement process, they should be issued in very convenient denominations. Moreover, precisely of this clearing or exchange media process all the debtors of a payment community - those indebted to the issuing centre, must accept them at par, i.e., provide the required "readiness-to-accept-foundation" for them, while others must remain free to discount or refuse them. - Thus they can become a local ticket money or local currency and will, automatically, be kept within the limits for such a currency, provided only they and the goods and services that they turn over daily, are expressed in a sound enough and widely enough accepted value standard. - J.Z., 2.6.03.)
A problem has been, for decades and still is (to a lesser degree): Creating opportunities to invest on long-terms. I did write about that particular problem in former letters.
You say: "The future is always uncertain, and a prudent bank will keep some margin of reserve against possible eventualities."
(When even theorists, historians and writers of Free Banking books and articles, like Henry Meulen, still had such false ideas, and upheld them in the face of informed and intelligent criticism, then one should not be surprised that the vast majority of practical bankers had them and practised them. - J.Z., 25.2.03.)
My opinion is: Note issuing banks of the new type will - - at least in the beginning of their activity - - have no reserves, except the interest their debtors must pay. The reserve of a future bank will be the enlarged obligation of its debtors to accept notes at their face value in the debtors' businesses.
Example: The bank's outstanding notes amount to 100,000 L. The bank's "reserves" amount to 10,000 L. That will mean, that the bank found the possibility to get 110,000 L of its issue accepted, although presently there are only 100,000 L. still outstanding.
The obligation to accepting notes is in the best way founded upon additional loans from means belonging to the bank as a property.
(J.Z.: This last sentence is in B.'s "English", literally. It is not clear enough for me. Perhaps you understand him better in this instance than I do? He may have meant: Beyond the issuing bank's debtors' obligation to accept the bank's notes at par, a further issue of notes is best founded upon the bank's own property, from which it may grant loans, in its own notes, which, as its own IOUs, or clearing certificates or bonds, it would have to accept at par in repayments to itself. - J.Z., 25.2.03.)
I think that the possibility that the public will want to get rid of notes must always be taken into consideration. That desire of the public may arise without the occurrence of a real panic or a distrust in the banker. The Banking policy of old times did not take into consideration such a desire but thought it possible, to keep the notes always in circulation.
(J.Z.: Just as if they were coins. That is not surprising, since many to most thought them to be just paper substitutes for coins. - J.Z., 25.2.03.)
The great denominations of notes in old times (L 1 in Scotland, L 5 in England) demanded or permitted a banking policy different from the policy necessary in future.
Providing means for paying wages was obviously not the main task of banks of issue in the days before 1844 and not of the Bank of England, either, afterwards. (For a long period. - J.Z., 25.2.03.) By now wage payments will be the by far most important element in banking policy. (For note-issuing banks. - J.Z., 25.2.03.) I believe that this particular is of the greatest practical importance.
Runge. I, too, doubt R.'s starting point: "prices in Germany are too high" is well founded. I think that German prices are, rather, too low. That seems to be the general opinion in the whole world and seems to be the main reason why competition from Germany is feared. But on the other hand Runge is right: Although the "consensus sapienti" in always of some weight, here can be a doubt, whether the consensus is that of "sapienti".
Party programmes. What you say about Bevin is very interesting. "Tschau, tschau" as the Austrians say.
That the "Individualist" has no effect on Mosley was to be expected. The reasons are more honourable for the "Individualist" than for Mosley.
Ezra Pound. One cannot be at the same time a good poet and a good economist, says Proudhon. (The thought about Lamartine.) He could have mentioned Solon, who transmitted his economic views to posterity in verses, but is the first, who reported a devaluation. At his time paper was not yet in general use, and insofar he is excused for not having introduced Free Banking in Athens. Potsherds are not a good material for bank notes and were - - it seems - - the general material used in writing.
Conscription. To demand its abolition under the present circumstances is mere demagoguery. People will defend themselves against Bolshevism, and as long as no other means is found than conscription, this means must be regarded as morally justified.
(J.Z.: I cannot follow his logic here. If people will defend themselves, then there will be enough volunteers! But our primary job should be to become aware of and to defend allow individual rights and liberties against the own government. Then we will really have something worth defending and then there will certainly be enough volunteers. Moreover, then, we would hardly have to fear an attack, for the soldiers and officers then commanded to attack us would rather rise against their own despotic government or desert to a rightful government in exile, or several of them, all of them our allies against their despotic regime. Our example might then also lead to putsches or revolutions overthrowing despotic regimes and introducing free societies instead, just like on our side, all for voluntary communities only and all applying only their own personal laws to themselves. However, there are some rare instances, under current conditions, when fools have to be compelled to do the right thing. I believe even enforced military service against the Nazis was right - but it came all too late, was conducted all to wrongfully and irrationally and should have lead, on the side of the Allies, to really free societies, instead of more and more statist and nationalistic ones. Some of the exceptions were mentioned earlier in these letters. Generally, territorial governments are as inapt in defending people as they are in all other matters. However, people mis-educated by governments and kept in a perpetual kindergarten, even as adults, are not mentally, physically, financially and morally prepared for rightful defence actions. They rather engage in wishful and less than half-informed antics, and protests, like most of the recent millions of peace protestors. Indeed, they would rather not have another war. But they do not know how to prevent it, what really causes it, how to disable a tyrannical regime otherwise and do not care about the details, either. They rather put their feet into gear than their minds - in such matters and, by ignoring certain dangers, drift into desperate situations. They have no clear idea what makes for peace and security and what they could really do to achieve them and maintain them. Such interests are rare even among anarchists and libertarians, as I know from the response among them, to my two libertarian peace books, or, rather, from the lack of response among them to such writings. In this they are, mostly, just members of the common herd, exposing themselves to raids by the own wolves or foreign ones. Some dogs and cats have better senses regarding their own safety. - J.Z., 25.2.03.)
Conscription is not justified in cases like the Commune of Paris in the year 1871, where it was introduced. The citizens of Paris did not appreciate the advantages of the Commune highly enough to want to endanger their own lives and those of their families. The great number of "refractaires" under these circumstances is not surprising.
Nevertheless, a means can and should be found to respect the attitude of real conscientious objectors. In most cases, they are ready to do service in hospitals etc.
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The beneficial influence of freeing banknotes from cours forcé, and even from being a legal tender, is largely discussed in elder German monetary literature. It seems, in English literature it is rarely discussed. In the Prussian State Library (4 millions of volumes, now destroyed for the greatest part), I found no English book pointing out the probably economic influence of freeing bank notes from cours forcé. I found no more than three or four books of American authors on the theme. They were led to it by the greenbacks. The best book I found on the subject is that of the then young Professor Adolf Wagner, "Die russische Papierwaehrung", Riga, 1868. (The Russian Paper Currency. - J.Z.)
The elder German economic science always took it as self-evident that cours forcé is the condition qua non of inflation. "Vulgaer-Oekonomisten" and average editors often did not distinguish notes with cours forcé and others.
At the bankers' congress of 1908 one member had the courage to confess, that probably no other member present then knew, that German banknotes were not endowed with cours forcé, although this was explicitly stated in par. 3 of the Bank Act of 1875. And it 1875 it was considered to be a very essential matter. Then the government said: "People, you may accept the notes without distrust. They cannot be inflated, because they are not endowed with cours forcé." As much can the mentality change within a few decades.
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Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 30. III. 50. Your letters of 24., 30. and 31. I. 50. Your letter of 24. III. 50.
Dear Mr. Meulen,
let me first confirm the receipt of the 25 Deutsche Mark West. This was much more than I had spent.
Concerning the medicines, Pankreon, Ceadon, please let me know whether you intend to continue their use and if; whether you will find them at London, and if not, whether their importation to England is permitted. Then I will be - - I hope - - able to sent to you from time to tome some boxes to London.
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Prof. Niklas, speaking of the agricultural production in Germany. As I understood the speech of Niklas, he did not mean, that Germany has a surplus in the sense in which the word was understood in the year 1913. Germany's production recovered surprisingly (reason: freeing the economy from planning, price controls and such things), but it seems, it does not yet suffice in all "sectors". But vegetables are now produced in such quantities, that gardeners demand "protection". It the economy would be free enough, gardeners would change their occupation and Germany would import vegetables from Holland, etc. The same may become true of potatoes and, perhaps, of grain. My own view is: German agricultural production could be very much cheapened and thus increased that imports would only be necessary in relatively small quantities, if the plant would be improved.
In the years from 1945 - 1947 practically no tool could be obtained, no nail, no hammer, no thread, no needles, etc. Now ploughs etc. are wanted. If the Americans would not or need not, by order of their government, demand dollars, then they could get a great market for agricultural machines and implements.
Germany is now fully able to pay for all her imports. What she needs is exportation of her own bureaucracy. All other kinds of exportation and importation will then technically possible and would be without hindrance by the bureaucrats.
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The thing with the poets, reported in "New Statesman", is a pretty mystical one. Some mystics think that thoughts are beings endowed with vita propria and may manifest their life in several individuals at the same time or nearly at the same time. You know the fact, that the most strange ideas are sent to patent offices often at the same time, and in these cases certainly no intercourse of the two individuals was possible. I beg to write more about it in one of my later letters.
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Private Press Conference of Mr. R. A. Butler. Concerns the avoidance of unemployment he spoke de omnibus rebus et quibusdam aliis, but not of the one essential: to provide payment for the unemployed after getting employment.
The Right to work must today be claimed in the form of a Right of banking. Who knows that???
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Neither Aldred nor Butler even know of the existence of the Right of Banking. One of the reasons is: Free Banking, until now, has always been represented as a technical matter. The Individualist's standpoint must be: Good or bad - - it is our aim and we claim the right to do also those things (among ourselves - J.Z., 25.2.03.) that seem bad to other people. That abbreviates discussion and brings it to a very different track.
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Has Armand ever claimed the Right of Free Banking??? I am inclined to write a letter to him. It seems he understands German.
Your friend's statement, that prices in Berlin are in the average not higher than in London, seems to me well founded. In one of my next letters I will communicate to you some Berlin prices and then you may compare.
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Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 31. III. 50.
Dear Mr. Meulen,
at the time of the crusades there arose the fable of a book with the title "The Three Impostors". The book never existed, although some centuries later authors wrote books with this title, in order to get attention and a market for their book. The fable said, that in the book was explained, that Moses, Christ and Mohammed were impostors, whose crimes were glorified by other impostors, so that the two Testaments and the Koran did not deserve any esteem or trust. The fable said, moreover, that the pope had strictly prohibited the mentioning of the book and that owners would be pitilessly executed and very cruelly, too. It was generally believed, that the Templars
possessed the book and were no longer Christians but adored a god called Baphomet. This fable helped king Philipp much in the extermination of the order. Although he proceeded without justice, the subjects said: "Au fond il a raison!"
The good of all this nonsense was: There was a wide-spread feeling, that Christianity was not well founded and only upheld by the Inquisition. When the great enlightenment began, it found its field well prepared.
A similar effect took place in Germany by the prohibition of Nazi literature. The books - - and especially "Mein Kampf" - - became very rare. (Russian officers paid in the year 1945, in some cases of which I heard, 600 marks.)
But the very rareness of "Mein Kampf" has the effect that many youths are convinced: This book contains all political wisdom; there the Fuehrer pointed out how to nourish a people, how to give him the best organisation, how to organise an irresistible warfare, etc. "If the bourgeois-generals would not have betrayed him, he would now rule Europe", that's what many believe. (Some young fools only. - J.Z., 25.2.03.)
If the books still existed, the matter would be simple. One would tell the young people: "Here is, what the rascal wrote, and here is, what Goebbels wrote and said, and here is Germany's older generation, which followed this "wisdom". Be more intelligent!" The youth would certainly have tried the latter, and the older generation would now stand in a very bad light, the light that it deserves, insofar as it followed Hitler.
Prohibiting books has seldom in history been a good way.
(J.Z.: There may be a case for reproducing all their output - but always only with sufficient critical comments, from facts, reason and morality, to every of their wrongful assertions. That might not require more than a few CD-ROMs. A bibliography with abstracts to all the anti-Nazi literature should also be included there. - J.Z., 25.2.03.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
I think you read the article in "News Chronicle" of 13.3.50, "The case of Seretse Khama" by Vernon Barlett, translated in "Die Bruecke" of 16.3.50. Your impression will have been the same as mine: Here is only one help: The application of the principles of individualism. The natives have a just claim to unexploited labour, and if the life in Kraals is preferred by them, there is no reason to refuse them a life organised in this way. Even if, in consequence, the gold mines would have to be closed for lack of workers. Let them be closed! May people, who want gold, pay for it so highly, that the natives are induced to leave their Kraals and work in the mines. And if the Boer-Government would know a little more of colonial history, then it not only would favour the immigration of Indians, but that of Chinese, too, and of other races. As already Aristotle said: Mutinies of slaves, on a large scale, are only observed when the slaves are of the same nation. That is true, too, if the slaves are freed, have become wage workers, but are for some reason inclined to a mutiny or a civil war against other races. If there are several races in the same country, one outweighs the other.
(J.Z.: The old maxim: "Divide and Rule!", which already the ancient Romans applied. The opposite to this rule and practice is the complete division into voluntary communities, by free individual actions (based on individual sovereignty and individual secessionism and personal laws) with none of these communities retaining a territorial monopoly of any kind. Then these communities can no longer be dominated by anyone, nor would they have any strong reason or motive to fight each other or to try to oppress each other. Any such attempt would arouse so much antagonism against it, that it could be rapidly squashed with a relatively small effort. - PIOT, J.Z., 25.2.03.)
Portuguese have always favoured marriages with coloured people. Experience taught them, that natives, married with whites, always are friends of whites, if they whites do not suppress them. History reports no sedition of natives in Portuguese colonies, although they are as badly administered as one may believe.
Very truly Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 6. 4. 1950. Your letter of 3. 4. 50., received today.
Dear Mr. Meulen,
I am very glad to learn that you are now at home and, insofar, in safety. The trouble of such a voyage, certainly intensified by your lack of money, thanks to modern exchange dirigism, would have been a serious matter for a nature less energetic than yours.
I hope that in the meantime you received my letter of 30. 3. 50, where I confirmed receipt of your 25 DM West. For every case, I confirm that you departed from Berlin on Friday, the 24th of March (12h).
My advantage from your visit was certainly greater than yours. I felt very bad, when you arrived, and always used a cane, when I must walk on the street. At the very moment, when you came, all such troubles had disappeared, and you know yourself, that I was able to walk several hours without trouble and cane.
If you see Zander please greet him cordially and hand over to him the enclosed copy. This copy is the result of a discussion which I had at the family Vierkandt. Both, the professor, born at 4. 6.1867, and his lady, born 10. 4. 1873, are extraordinary people. At first I took the lady for a little more than 50 and felt myself superior in age. (Her hair is not yet gray.) If our younger people possessed her energy and her intelligence, reformers like you and I would not encounter much resistance.
Last Monday there was present a couple von Natzmer, very sympathetic and intelligent people. (One of the family was a Field Marshal under Friedrich Wilhelm I of Prussia, another was a general at the time of the Napoleonic wars. After the convention of Tauroggen (30. 12.1812) it was his task to convince Napoleon that this convention was without military and political importance, so that the emperor would not undertake reprisals. But Napoleon judged this Convention from the right standpoint.
We talked of modern scientific literature and that there was no capital in Germany or Berlin to publish good literature, whose sale would require 10 years or so, that means, the normal time. I stated, that it would be very easy to get capital, more than necessary, by eliminating the bureaucratic and legal impediments, partly created by the ignorant German governments, partly by the Allies. I was sentenced to frame the sketch of a pronunciamento fit for a society, whose aim should be to fight against these impediments. Especially the Frau von Natzmer (between 25 and 30, I estimate) said to me: If I get from your sketch the impression that your ideas are no nonsense, I will do what I can to realise them, and if it should require many years. At the moment my impression is: the ideas are good.
If Zander, with his Bel-Color would still be in Berlin, he immediately would be concerned. Insofar the copy could be of interest to him.
Obviously, there is a limit where freedom from taxes for reconstruction purposes is no longer useful, say, to extend the time, for which the relevant law is valid, to more than two generations. Perhaps you will give Zander the tip:
Apply to the Jerusalem University Department for mathematical economics to propose general principles, which may apply first of all to Israel, but which will, after their publication, certainly be known in the whole world and kindle a vivid discussion, on using freedom from taxes as a means for reconstruction.
Let me remark, that in Germany, after all great wars, that means was used, last time in the year 1920, for capital invested in houses. In Prussia, after the great wars of the last 3 centuries, it was usual that the king furnished timber from the royal forests to everybody willing to build new houses or to repair damaged ones. Besides this was granted freedom from taxes for at least 10 years and often longer.
Very faithfully Yours - signed: U. v. Beckerath.
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U. v. Beckerath, … 7. 4. 1950.
Dear Mr. Meulen,
after our discussion about the gold standard we agreed, that the word "gold standard" is now used in England in a sense quite different from that in which it was used in the year 1850 and in which it is still used in the USA.
If the modern sense would be the right sense, a country without note-issuing banks cannot be on a gold standard, on the other hand, if it would be the custom in this country to fix all prices, taxes, debts etc. in gold coins, that would not be sufficient to constitute a gold standard.
I have tried to collect all details which until now economists believed to belong to a real gold-standard, the word used in the sense of 1850.
1.) All prices, wages and recompenses are expressed in gold coins or in the same money unit in which the face value of gold coins is expressed. But it is not considered as an attack on the gold standard if certain wages are not fixed in gold, say, wages of agricultural workers. Also, it may be permitted to certain classes of taxpayers to pay the tax by labour, say road labour for peasants, which still is the use in some districts of America. Such a use would also not be considered as being against the gold standard.
2.) All owners of gold in any form, especially in the form of ingots, are entitled to let it be coined into legal tender gold coins. This right is not restricted and is not subject to a supervision, except in cases, say, where the owner has probably stolen the gold.
3.) There in no restriction on transfers of gold in any form, from one citizen to another or from foreigners to citizens or to perform any other transfer of gold from one person residing in the State to any other, or from any person to a person residing in the State. This freedom includes all forms of gold, coins, goods and others, explosives like fulminating gold, perhaps, excluded.
4.) Pretended or real alterations in the value of gold cannot be maintained in fulfilling contracts, except in the manner that is agreed upon or legally prescribed. (Index standard and similar things.)
5.) Gold coins are endowed with cours forcé.
6.) Every creditor is entitled to demand gold coins.
7.) Debts are considered as being contracted in gold coins if there is no special debt clauses that appoints anohter measure of value.
8.) Bankers are obliged to redeem their notes in gold coins, at the face value of the notes, either on demand or with a delay indicated on the notes. (Option clause notes)
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If there is a silver standard to be described in the above 8 points, then the word "gold" is simply to be replaced by "silver".
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The authors of the Four Bills thought that points 6 and 8 are not essential, so that the respective laws may be repealed without repealing the whole of the gold standard, the word used in the sense of 1850.
I learnt from a collection of Persian laws that in Persia a creditor is not entitled to get gold coins, but must be content with "local currency" to the value of gold. That value is determined by the market price (of the local currency, reckoned in gold - J.Z., 25.2.03.) at the day of fulfilling the obligation to pay. But it is permitted to agree upon gold coins as a means of payment. These laws were from the time of Shah Nassr ed din.
Zander stated that in China there existed the same laws at the time of the emperors.
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It seems, that the English language does not contain a word quite adequate to the German "Gold-Rechen-Waehrung". (Gold-for-account currency or gold-clearing currency may come close enough. - J.Z., 25.2.03.)
By "Gold-Rechen-Waehrung" the Germans understand a standard, where prices etc. are expressed in gold units, but paid in local currency as the market price of gold may be, expressed in local currency. In the years 1922 and 1923 this Gold-Rechen-Waehrung was wide-spread in Germany.
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In the whole literature before 1914 the case was hardly discussed that the people may have a right to refuse means of payment which it does not trust and this without being obliged to give explanations. Only coins of prescribed shape and weight were excluded. Everybody had to accept them.
In Prussia, and in most other countries of Germany, the right, to decline all means of payment not being legal coins, was always acknowledged until 1.1.1910.
Obviously the investment policy of a banker must be very different
a.) if he must expect that his notes are refused, at short intervals (and be it only for a few hours), and
b) if he can trust that his notes remain as long in circulation, that his investment policy is not disturbed.
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The word "inflation" has lost its former sense entirely. The people - - not only in England - - are now no longer able to talk about such an increase of fiat money that the demand of the government for fiat money, exercised by taxation, is much less than the circulating amount of currency. And why are the people not no longer about to talk about this? Because the very words, necessary for such talks, are amiss.
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I think, that if it would be impossible to restore the original meaning of the word "inflation", then a new word must be invented to express what originally was expressed by "inflation".
Very truthfully yours - signed: U. v. Beckerath.
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(U. v. Beckerath, Some Notes on Gold, dated 14. 4. 50. - I don't know to which letter to Meulen he attached this note. - J.Z.)
1 troy ounce of water = 1.9 cubic inches.
The density of gold is 19.3.
Consequently, a troy ounce of gold = 1.9 : 19.3 cubic inches or, approximately = 1/10th cubic inch.
To find the length (= width = height) of a gold cube, weighing X troy ounces, firstly its number of cubic inches is to be determined. This is done simply by taking the tenth part. Of this tenth part the cubic root is to b extracted.
Example:
Length of a cube weighing 1 million of troy ounces.
The cube contains 1/10 of 1 million = 100,000 cubic inches,
The cubic root of 100,000 is 46.4
The length of the gold cube is o 46.4 inches.
By the following table the number of troy ounces fine gold to be found in the statistics may be easily converted into cubes, whose side length, in inches, is shown by the table.
Number of Length in inches
troy ounces: of a cube, weighing the number of troy ounces indicated in the left column
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10 1
100 2.2
1,000 4.6
10,000 10.0
100,000 21.5
1,000,000 46.4
10,000,000 100.0
11,000,000 103.2
12,000,000 106.3
13,000,000 109.1
14,000,000 111.9
15,000,000 114.9
16,000,000 117.0
17,000,000 119.4
18,000,000 121.6
19,000,000 123.9
20,000,000 126.0
21,000,000 128.1
22,000,000 130.1
23,000,000 132.0
24,000,000 133.9
25,000,000 135.7
26,000,000 137.5
27,000,000 139.2
28,000,000 140.9
29,000,000 142.3
30,000,000 144.2
31,000,000 143.8
32,000,000 147.4
33,000,000 148.9
34,000,000 150.4
35,000,000 151.8
I read in the "Tagesspiegel" of 13.4.50., that in the year 1948 the world gold production has been 24.2 million ounces and in the year 1949 = 24.9 million ounces.
That would be a cube of about 135 inches a side, or a little more than 11 feet.
Let us suppose, that of the 2. 25 thousand million inhabitants of our planet 1,000 millions are buyers, then the annual production would be 25 : 1,000 ounces per buyer or 480 : 40 = 12 grains per buyer.
About 1/3rd of the annually produced gold is used for industrial purposes.
The legal weight of a sovereign was 123.274 grains.
Thus the quantity of gold added to the world's stock of gold every year seems not great enough to cause an inflationary effect.
Signed: Bth. 14.4.50.
(The text is messed up. In the middle of the second page I find inserted, between the lines: "A little joke." Bth. may have meant this as the heading for this note. It is not really a joke but an indication of the relative insignificance of the annual gold production, in total size, in cubes, and in weight per person, especially when compared with the accumulated and still preserved gold stock - J.Z., 25.2.03.)
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18.4.1950.
Dear Mr. Meulen,
some days ago I received with much pleasure and many thanks the "Individualist", April issue. I hope to write some lines this week or next about the articles concerning Germany and Berlin; they are excellent.
Very faithfully Yours - unsigned.
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(U. v. Beckerath) 21. 4. 1950. Your letter of 19. cr.
Dear Mr. Meulen,
a specialist may laugh at it, but: In text books on physics one may read, that if an orange is placed between the two poles of an electrical machine and the machine operates, then the sparks pass through the orange and make it pretty transparent. The interior of the orange is - - I read - - to be observed. Perhaps you have a boy among your friends, whose school posses an electrical machine and whose teacher is ready to execute the experiment. If I understood the experiment rightly, then the question is (berechtigt) (warranted - J.Z.), whether it may be possible to make transparent the human body by a suitable alteration of the device used on an orange, without causing too much pain. (Or damage! - J.Z., 25.2.03.)
That the human body really may be made transparent to a certain degree can be easily observed in sunshine. My hands, e.g., not embarrassed with much flesh - - that's true - - are transparent in sunshine, so that the bones can be distinguished from the flesh.
If my idea should not be without foundation, then it is, perhaps, possible to get a better observation of your digestive apparatus than has been possible until now, and so to learn to know what really has been the trouble. I think that Roentgen-Photographs have been taken (for German physicians that would be the first, to take a Roentgen-Photograph), but it seems, they have not been sufficient.
(J.Z.: Here B. was behind the times. I remember that in my youth even better shoe shops had x-ray machines, that tested your newly shoed feet, to determine whether the fit was quite right. The dangers arising from such x-ray exposures was simply ignored in these cases. Later these machines were, very quietly, removed. I assume that this was before 1943, perhaps even before 1939. I was subjected to repeated compulsory x-rays in Berlin, at about the time that B. wrote this letter, as part of the fight against tuberculosis. When I came to Australia in 1959, compulsory mass x-rays were continued there, for the same purpose, under threat of considerable penalties for non-compliance, in spite of all protests that the radiation hazards thus caused for so many people, e.g., by additional cancer cases, may have far exceeded the savings of lives by discovering with this method some tuberculosis cases. Some years later, some sense finally penetrated to the authorities and this mass medical program was quietly discontinued, in spite of the resistance of the medical bureaucrats involved. - J.Z., 25.2.03.)
That your health id improving so slowly is a great impediment to our movement, but that it is improving, that is a consolation. At present you are the only man in England who demands the most important right of mankind, the right of issuing and accepting freely and without State control standardised means of payment. Even Guy Aldred, who calls himself an anarchist, does not go so far, obviously because he does not see such matters as clearly as an economist and reformer should see them. Once this right is established, then the technical and legal conditions, by which it can be exercised, will, very soon, be taught by experience, our common teacher. Our opinions will not be excepted, and what is now, perhaps, impossible to justify, in the other's opinion, will be demonstrated by reality or, it will be shown, in a clear manner, that it is not justified.
That brings me to your letter, one of the longest I ever had the pleasure to receive from you.
You say: " ... whether or not a man can sell his stock at a profit must always be speculative".
That is quite right under the present economic conditions. But by this statement the theme is not exhausted. The statement merely puts it in the right light.
I.
Jaques Bernoulli, in his "Ars conjectandi", the first work about the calculus of probability, first printed 1713, eight years after the death of this celebrated author and still in high esteem (burnt) said, that a certain, very small degree in probability in civil life must be considered as zero.
Example: A judge is convinced, that a man has committed the crime for which he was accused. But he admits, that if there were 10,000 cases like this, there probably would be one, where the accused is innocent, although all evidence seems to be against him. In such a situation - - says Bernouilli - - the judge should sentence the accused. Human beings are never so certain, that the certainty is an absolute one, except the fact that the man must die. Even this certainty may be considered as not being 100%, as long as it is merely derived from the fact, that men of more than (say) 200 or so years have never been found. You know, that Jonathan Swift, in one of the reports about Gulliver's travels, reports from a country, where from time to time were born "stultbruggs" (in the language of that country), immortal as men and the most unlucky creatures on earth. The philosophic Swift found out, that his report could not be considered as quite (that is 100 %) incredible, insofar as merely the "stultbruggs" are concerned. Suppose that mankind existed on earth for a million years (which may not be far from the truth) and that the average number of men was always 2,000 millions (which, very probably, is to high a number), then one can only say, that among the billions who have lived during the million years, none have been found who were not dead after at most 200 years. In the first reports of the Portuguese from Goa, a rich man is mentioned, who was several 100 years old, had generated more than 700 children end was hated by his countrymen because he was considered a usurer.
Buffon in his "Arithmétique morale" (burnt) says: The fraction 1 : 10, 000, proposed by Jacques Bernouilli as to be considered as zero in civil affairs, seems to be too large. A better fraction would be the probability for a sound average man to live still after 24 hours. Buffon estimated that probability at 1 : 100,000, which agrees quite well with modern life tables. That probability is - - says Buffon - - considered, by every man, as 100 % and, consequently, the opposite prohability as zero. As for myself, I am inclined to prefer Bernouilli's fraction of 1 : 10,000, because it is - - I think - - beyond human capabilities to distinguish such small probabilities otherwise than by calculus from other probabilities of about the same magnitude. 1 :1,000 - - from this standpoint - - seems to be a better fraction than even Bernouilli's 1 : 10,000.
If Bernouilli's or Buffon's considerations are admitted, then a probability for not selling one's stores may be considered as zero if it is less than one of the above mentioned values. To give an example: The probability that Lyons will suddenly cease to sell tea for some pounds, although the firm's and England's circumstances are not essentially changed, is certainly less than 1 : 10,000. So I would not hesitate to permit Lyons an emission of - - say - - 100 notes of one money pound each, with no other cover than the tea at Lyons' shelves and for which the notes may be used as a means of payment, although - - theoretically - - your objection, also in this case, is not without foundation. (Very probably, you will admit, that Lyons is good for much more than 100 pounds of uncovered (by gold or silver - J.Z.) notes.)
Here I need not point out the generalisation of the foregoing notes.
II.
It's an old point of German note issuing theory that only sold goods are fit to serve as a base for note issues.
The issue of notes does, in this case, serve to finance the sale.
(J.Z.: Not, directly, the primary sale of the factory to the wholesaler, but the sale of labour to the factory and the sale of consumer goods to the workers and the sale of the goods from the wholesaler to the retailer. By these certainties, under freedom conditions, it even assures the primary sale, in a continuously repeated process of production and exchange. - J.Z., 26.2.03.)
The note issuing bank hands out to the producer of the goods a loan (a short-term one, in its own notes, in exchange for his claim from their sale - J.Z., 26.2.03.) equal to the amount of the sold goods. The producer, who has meanwhile sent the goods to the man (firm) to whom he has sold them, pays with the help of the notes the raw materials, labour, services etc., which had been credited to him, when he proved that he would produce upon a definite order. From the people, who received the notes - - so supposes the theory - - the notes will find their way to the buyer of the goods, from there to the seller and from there back to the bank.
(The main flow will be from the producer to his workers and contractors and other suppliers, from them to the retail shops, from there to the wholesaler to whom the producer sold the goods. Since the verbal description of this process is always a bit unclear or even confusing, see my circulation charts on this process, in PEACE PLANS No. 41, now also available by e-mail from me, until they are available online or on CD-ROM. - J.Z., 26.2.03.
Thus, and in Germany, note credit was merely used to finance current production or current sales of the usual kind to supply the people (with daily needed goods and services. - J.Z., 26.2.03.).
Credit with newly issued notes was not used to finance machines, buildings and other means of production.
Without being guided by theory, the bankers had obtained very bad experiences with financing the means of production through note issues. The common saying was, and it was repeated in every book on banking: "Mit Bankgeld darf nicht gebaut werden."
(J.Z.: "One does not build with banknote issues". - Meaning with notes freshly issued only for this purpose and "covered" only by the building, once it is finished, or a claim against the builder. Long term loans, mediated through the bank or from its own capital are quite another matter. - J.Z., 26.2.03.)
It is true that some "reformers" asserted: As good a purpose, as the financing of means of production (and the construction of such real values - J.Z.) cannot have such a bad effect as the depreciation of the notes, if the loan is good in the commercial meaning of the word. The experiences were too bad and, although "practical men", like bankers, never read economists like Adam Smith, they knew cases enough, as Adam Smith reports them. They generalised these cases and were correct in doing so.
But the right theory, which proves that bank notes issued, where, instead, the issue of mortgage bonds would have been he right thing, m u s t get a discount, that theory was explained as early as by Adam Smith.
I myself think, that the German theory (Adolf Wagner, Roscher, Lexis, Lorenz von Stein, etc.) is correct. My critique of the theory is that it did not go far enough. As "buyers" the theory considered merely shopkeepers and other people not being the last buyers. I consider the shopkeeper's customer as the "last buyer". And I say:
These last buyers must be included in the system, if it is to work as well as it can. So I proposed, in my dissertation on Milhaud's propositions, that every worker, employee, peasant, employer etc. shall order his supply for a time in advance, at least for some months. These commitments should, I proposed, be performed on the well known scheme of "put", of "call" and "put and call" of the London Exchange. (In German: by "Vorpraemie" and "Rueckpraemie".)
Concerning the details of the technique I refer to my book on employment.
If the details should be found to be economically possible and would be applied, then the speculative moment, which you emphasise, is discarded. We agree, that the speculative moment does exist.
(J.Z.: Like all innovators, B. wanted to apply his "order- system" by consumers for produced goods, to be applied more widely than would really be necessary or expedient for the consumer. In practice, goods, from locomotives down to computers, are already widely produced only upon orders. But there are many other goods, which do not need advance orders in order to be regularly sold at market prices, fluctuating with their seasons, e.g., for standard fresh food items. For me the inclusion of workers and of all ordinary consumers - in the monetary freedom process means mainly, that the provision of means of payment for them, of wages, salaries, service charges, and thus of means of exchange for them, to buy whatever they want in the shops, even in "impulse-buying", is done freely and competitively. It means that these exchange media can and must be competitively supplied by all those, who offer these goods and services, namely the shops, the shopping centres, department stores etc. and their special local associations for the issue of optional local currencies. Only the issuers themselves [and their debtors by contracts] would have to accept them at any time at their face value, as legal tender, in all their sales and in all other debt payments towards them. The acceptance of such "shop foundation" money would constitute already a "generalised" order for consumer goods and services to the same amounts. That freedom, so issue such self-committing notes, purchasing vouchers, readiness to accept commitments, etc., would release an enormous monetary demand for labour, for more labour than the available employed, unemployed and refugees would be able to supply immediately. A large part of all the ready for sale goods and service could be liquidified for this, limited only by the readiness of potential acceptors to accept such notes in payment for what they have to offer, e.g. in work and services. At the same time, to the extent that such free note issues are used to finance, with very short-term loans, current additional production, with additional labour, it would assure sales of goods and services, to the extent that such issues are made for such purposes, since such goods and service warrants, in money denominations, have but one way to go: From their recipients, directly and indirectly, to the issuers, to be redeemed in their goods and services. But B. was right insofar, that all goods and services, whose sale is not sufficiently assured by current and wide-spread consumer demand, e.g., extensive and costly dental work, should, as far as is possible, only be produced upon orders, not merely by speculating upon their possible chances to be sold in a free market, without advance orders for them. I have certainly produced my libertarian microfiche without sufficient advance and even current orders for them and, as a result, most of them are still remaining unsold. However, I was clever enough to limit the number of duplicates, that I ordered from my service provider, for each title, to 100 only, so as to have at any time enough on hand, at least if no sudden and relatively large "run" develops upon any of my microfiche. More duplicates can be easily and rapidly ordered and then be automatically produced. To that extent my libertarian microfiche output is also only upon orders, a production upon demand. I can assure you that the monetary demand for it was so far very small and does not even cover more than a small fraction of the costs of expanding my PEACE PLANS series. To that extent it is still VERY SPECULATIVE, even after a quarter of a century of such production and sales attempts. But then I do not expand my series any faster than I can produce new titles and can afford to pay for their microfiche reproduction in one master copy and in 100 duplicates. - J.Z., 26.2.03.)
It is your opinion that it will be sufficient if a banker appreciates a borrower's character. But I assert, that the speculative risk (of not finding buyers at the time when buyers are wanted) cannot be removed even by the most careful discrimination of a borrowers character. The condition here to be fulfilled requires not only trust in the moral and usual sense of the word. It requires the possibility to make good the notes without economically hurting the bearer of the notes, and that at any time when the bearer wishes to "realise" the note.
Insofar, I am an adherent of the old "redemption on demand" requirement, but I say: The redemption in gold coins being impossible in times of a crisis, the redemption must be of a kind that is as good as possible. (Economically and psychologically possible.) The "making good" of notes in commodities and services is the second way. It also seems more natural and justified, because it has been proven (and is even self-evident - - as you explained in your book) that the note-bearers do not really want gold coins but they do want commodities like consumer goods and services. (I took considerable liberties here in rewording B.'s English formulations. - J.Z., 26.2.03.)
Let me add that it is not my intention to discard individual bankers as note-issuers. (Did Henry Meulen fancy himself as one such banker, some time, in his future and was therefore so committed to this ideas? - J.Z., 26.2.03.) At least they are necessary as competitors for other note-issuers. It may also be, that experience will proves them to
be the best note issuers. But, certainly, the mere fact that notes are issued by a private banker does not protect, in times as ours, the most careful banker from getting his notes depreciated at the first occasion where a depreciation may be possible. I here use the word "careful" in the sense of 1844.
My demand (insistence? - J.Z.) that the people should order their supplies for some time in advance, has nothing to do with the question, whether the note-issuer is a mutual cooperative or a private banker, as at the time of Adam Smith or a corporation, as at Guernsey, or a simple merchant, as often enough happened in the 18th century and, in some cases, during the German inflation, in the years from 1919 to 1923.
A 100 % commitment (which I myself consider to be psychologically impossible) would avoid depreciations of notes (and crises) in every case. The same effect would - - I estimate - - already be attained by commitments of about 1/3rd of the current supply, 2/3rd being of such a kind, that the people must buy it (provided, they have the means of exchange). Examples: bread, vegetables, tobacco, etc.
(J.Z.: Another order system, open to ordinary consumers, would be their commitment to buy all their ordinary requirements from e.g., a certain department store or shopping centre up to a certain amount, e.g. for the next 3 months. They might commit themselves, e.g., to spending $ 1,000 at Woolworth shops, during the next 3 months. Upon that commitment, which might be technically be realized by buying a consumer credit in Woolworth "shop currency" or in a Woolworth credit card for that amount of credit and period [like a photocopy shop card or a phone card], Woolworth might grant them an attractive discount on all their shopping for that amount and that period. Consumers might benefit more from such an arrangement than form laboriously and time-consumingly shopping around in several shops for the best bargains. Different supermarkets would still continue to compete with each other for such advance orders, by continuing to offer attractive "specials" and generally low price levels, so that the consumers would tend to prolong their arrangements with them. Consumer coops have long operated on this basis but a formal consumer cooperative does not have to be established to achieve almost the same objective, namely a reduction of consumer prices, for the participants. - Woolworth at Bowral, NSW., does already offer shoppers spending at least $ 30 to $ 50 at their store, a discount at their Bowral petrol station of from 2 to 6 cents per litre [which presently is almost equal to the same percentage], which for many shoppers achieves largely the same purpose. - J.Z., 26.2.03.)
The principle of the division of labour is, in the textbooks, often explained by two men on an island, the one seeking berries, mushrooms, etc., the other cooking them, making baskets. etc. But the textbooks regularly forget one most important principle: If one of the two refuses to accept the other's labour or labour-product, the declined labour or labour-product gets a very considerable discount, eve if only two persons are involved. The textbooks always suppose a tacit agreement to mutually accept the labour or - - what is the same - - a commitment (Bestellung) (or mutual ordering - J.Z., 26.2.03.) I demand no more than recognition that this is already the necessary supposition in the most primitive examples.
If the commitments are not executed or not fulfilled, a discount of notes is unavoidable from time to time, even if the banker is most trustworthy and all his debtors try to pay on time. (? Readiness to accept the notes at par for consumer goods and services does remain. - J. Z., 11. 6. 03.)
It to true that other economists until now did not take that aspect into consideration (as far as know) but I speak with Father Abaelard: Si omnes patres sic at ego non sic!
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You say: "In the matter of the length of the loans again the banker is the best judge."
Certainly he is, may the banker be an individual banker or of another kind, and I do admit here, too, the possibility that an individual banker may be better than a mutual cooperative. (I learned from you, during your visit, that
that Benjamin R. Tucker, the "grand old man" expressed to you, in a conversation, the same opinion.)
But the banker, the individual one as well, must operate on principles. And I say: the line between short and long loans can be drawn, and the banker's principle must be to avoid long loans granted in notes.
(Otherwise, they are not much better than over-issued fiat money, i.e., without an immediate and sufficient reflux or demand for them, exerted by the issuer and his debtors. - J.Z., 26.2.03.)
(Long loans not granted in notes [issued for that purpose! - J.Z., 26.2.03.] may be executed, from [suitably timed - J.Z., 26.2.03] deposits or in another way. But old Huebner's principle must be considered: The banker should not sell better, longer or cheaper credits then he bought.) (The last sentence was printed bold by me. By the way, B. did not have the bold option on his ordinary typewriter and he did not use capitals instead. Thus he spaced words he wanted to stress by empty intervals. These are sometimes hard to reproduce accurately in a world processor. Therefore, I printed these words bold, as a rule. - J.Z.)
What you say of bankers "… more liberal in loans to a man who was continually turning over the money in his business, etc.", is quite my opinion, except that I say: The degree of speed by which the money was turned over must today be much greater than in old times. Your example of the forest financed by a note-loan is very good.
You emphasise the safety of the loans. You are right. But I always suppose that the banker (individual or not ) was prudent enough to care for his loan's safety. For the reasons I explained, it is not sufficient to care for the safety of the loans.
You demand, with the greatest justification, that the banker must be a prudent man. I wish to explain in what his prudence must consist.
(The Germans say: A banker must be able to distinguish a commercial [turn-over - J.Z.] loan from a mortgage, economically, and he should never accept the legal forms, presented to him, as economic facts. Debtors, who know the banker's principle, try constantly to offer to banker pledges that are really mortgages, instead of self-liquidating commercial bills [real bills - J.Z.]. Here begins the banker's prudence.)
From your letters as well as from your book, I get the impression, that you suppose: Means for long-term loans or loans of medium length (say 4 or 5 years or so) are scarce and that it is or should be the task of a note-issuing bank to provide means for such loans (except such as for forests in your example). But is your opinion well founded???????????? From the history of savings banks and of Building Societies I conclude that the thing which is lacking is opportunity for investors.
(J.Z.: Under the artificial and imposed conditions of almost continuous inflation, avalanches of ever changing laws and regulations, ever increasing taxes, amounting to penalties upon investments etc., one can, naturally, often get the impression that savers and investors are almost on a strike and that, in consequence, medium and long-tem investment capital is in short supply. But this shortage is artificially produced and will disappear with these man made restrictions and penalties. - J.Z., 26.2.03.)
Savings banks as well as Building Societies always have been in a little - and sometimes in great - embarrassment to invest the means entrusted to them. In the conditions for Building Societies, framed by the old expert Scratchley, there is a clause intended to protect the Building-Society against repayments without the consent of the Building Society.
I assume your attitude would be a quite different one, if you were convinced, that the note-issuing bank is not needed to provide long-term loans.
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Affecting prices by note-loans. I do agree that prices are raised by loans in notes if, without a note-issuing banker's activity a real scarcity of means of payments had prevailed. In such a situation prices are what Roscher calls "Notpreise" (emergency prices or forced sales prices. - J.Z.) In the 1890's an egg cost, if bought directly from the peasants, about 4 Pfennige. Obviously, this price was too low. The ideal prices are fair and just prices, not low prices.
(Here I differ, it seems, from Dr. Runge.) Fair and just prices are possible - - and not otherwise possible - - than by the activity of note-issuing private banks. This supposed, I do agree that prices may be raised by the note-issuing bank's activity. The question is: When does a raising of prices begin to become inflationary???
You say: "… But monetary reformers have always remarked the snowball effect of a loan in times of a slump." I protest against the designation of "snowball effect" if, by granting (turnover - J.Z.) loans (in times when the stores are glutted with goods), by the note issued for this purpose, the possibility is established to sell these large stocks. Whenever the stores are glutted with foods, then, and quite regularly, the means of payment are lacking, and, through that shortage of exchange media, the prices sink below the level that an economist can consider as desirable. If prices are merely raised to a level that an impartial economist must judge as just and fair, then the effect is no snowball effect.
Until now mankind never had too many goods. The greatest "overproduction" never satisfied the real want. But the want very often was not permitted to appear as demand, because the means of payment were lacking. I refer to your book, where you explained the thing in a very convincing way. The glutted stores must be considered from that standpoint.
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You refer to my letter of March 4, where I opposed to your example, the case of a country, which is destroyed by - - say - - an earthquake, but gets credit help from abroad. My objection was not well founded. The quesstion is here of note credits. But the credits to which I referred are not note credits but credits of the usual commercial kind. Not as an objection to your reasoning but as an interesting historical fact, let me mention here, that by the importation from America, England, Holland etc., prices in West-Berlin are sinking continually.
(Sugar now - - since March - - 1 Kilo = DM 1.20, to give an example.)
The greatest part of imported commodities is still supplied on a credit basis.
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Railway trouble in England in the year 1846. The artificial connection of credit with the gold supply may have caused many quite abnormal situations and unnecessary trouble. The credit should be quite independent from a country's supply with gold. Even if the last grain of gold were exported, credit should be available no less easily than before. This aim is can be achieved and I think that Free Banking can realize it.
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The year 1846 was a year of extremely bad harvests. In Ireland many people died and more emigrated. Economic conditions like these must raise prices without inflation. On the other hand, an export of gold and a reduction of the quantity of exchange media must lower the price level or - - if a tendency for rising prices existed, temperate this tendency. If prices rose although the quantity of circulating exchange media was diminished, that proves merely that the influence from the side of the commodities was stronger than the influence from the money-side.
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Paying American commodities by means of payment of British origin.
Please consider that I do not demand that American imports must be paid by means of payment of British origin. But I say: Neither should it be prohibited for English merchants to pay in this way nor for Americans to accept them.
Concerning England's balance of trade, it has often been observed, that the balance with the whole world must be considered. The balance - - so it was stated - - with a single country, USA or any other - - has never in history been zero and never will be.
(J.Z.: Why would anyone expect it to be, when balances of individuals with their various individual debtors and creditors practically never amount to zero, except when a particular transaction is finished? Otherwise they always either owe something to someone or something is owed to them by someone. Only in their relationship with all others, that they do economically deal with, can they strive to reach and maintain a balance between their incomes and their expenses. - J.Z., 27.2.03.)
In your example it would be sufficient if England exports the missing 50 million L to the rest of the world. Then a demand would arise in the rest of the world for means of payment, whose creditor resides in England or England may cede the amount of 50 million L, that the world owes to England, to the USA. To the USA it is the same thing, whether the debtor is an English firm or any other, if both are good. Goschen explained the thing very well.
(J.Z.: Well, B., with his choice of English words here did not, at least not for me, especially by speaking of "exporting" the "missing" 50 million L - instead of "investing" them. But then I haven't read the corresponding part of M.'s letter. - When a country, or one or several merchants of that country, buy anywhere in the world, with their own means of payment, then, to that extent, they do supply that country - or any part of the merchants of the world, with the means of payment to buy from the importing or investing country which issued these means of payment, or its merchants, who did. The most simple way to consider the matter is to consider money as tickets, with which one obliges oneself to perform. If one buys anywhere, anything, with these tickets, then these tickets are accepted anywhere only in the expectation that they are immediately or very soon usable for whatever performance service or supplies one has to offer and as such they will return to be redeemed in these performances. - J.Z., 27.2.03.)
You are quite right, that paying for American goods with depreciated English notes or bills, must raise the price for American goods, the price expressed in English Pounds. But why will you not let the last buyer (the consumer) decide, whether he will pay the price or not?
Is it really your standpoint: English consumers should pay price for imports only with foreign exchange, while English means of payment are not at discount, or they should be prevented from getting foreign goods at all? I do admit, that the later is the present standpoint of the present governments (It is the standpoint of all governments, as far as their subjects are concerned.)
My standpoint is: The less a government meddles in such affairs the better is the subjects' supply. Some passages from an author, whom I quote as an authority, do obviously confirm my standpoint. (Individualist, April 1947,
page 11, line 12 and December 1948, page 43, "Germany sets an example", and many others.)
What I demand is simply Free Trade, also in means of payments and even freedom to try new manners of payment. (Turned into "bold" by my. - J.Z., 27.2.03.
I am convinced that, you overestimate the danger of a depreciation of means of payments of English origin. If there is a depreciation, it will hardly be more than 2 - 3 % or so.
(J.Z.: Almost as insignificant as the gold-point fluctuations of purchase and sales prices for gold, in different countries, while there exists a free gold market everywhere, i.e., in the absence of government interference. Seeing the mentality of government officials, they are more likely to interfere with a gold market than with a free market in "tickets" or ticket money, once that is established. They are more interested in taxing increasing turnovers and even in that sphere they would gain more by issuing their own "tax tickets" to pay taxes with, in a proper way, to make tax payments easier. However, then they would lose the "deficit-spending" option. - But ultimately, monetary freedom would also lead to full financial freedom, i.e., the abolition of compulsory taxes and also of compulsory and territorial governments. They will probably become aware of that only once it is too late for them. Their understanding of monetary matters is not large enough. - J.Z., 27.2.03.)
I apply to your own business experience. Is it not so, that a discount of 2 % incites the attention of thousands of merchants, quite able to find out those English goods which are cheap at a discount of 2 % ? Consider that for every commodity there exists some discount, which will make that commodity the cheapest in the world.
Discount and its supposition, the free market, enables us to export continuously, to get continuous employment and to bring in order the feared balance of trade within a few hours - - without government interference.
Discount means private planning and is so effective, that it works the very day when it begins to operate.
Discount is the most valuable invention ever made. Discount enables the great warehouses (Woolworth, Wertheim, etc.) to reduce their prices within 5 minutes without altering one price label at the shelves.
Discount provides all advantages of devaluation without one of its disadvantages. Devaluation cannot be repealed (in practice). But a discount is repealed without and law and help from Parliament, the very day when it is no longer wanted.
If the hotelier at Dunkerque refused an English Pound Note, it was because there did not exist a free market for notes at Dunkerque. If such a market would exist, the hotelier would accept the notes at their market value. Arbitration would care for an honest market value. Consider that the notes superfluous at Dunkerque would have been paid with an agio at other places, say in the whole of Germany. Even Russian buyers would buy English notes if they could do it without raising attention, buyers for the State as well as others.
Disobedience may be a great virtue. Theorists until now considered merely political disobedience. They should, following Benjamin R. Tucker, the grand old man, investigate economic and social disobedience too. Their guides should be the consistent Free Traders in the beginning of the 19th century, who asserted, that if Free Trade is a right of man, then smugglers are the champions of that right and deserve the same esteem as other revolutionaries.
Buyers and sellers at the black market (who has the right to declare a market as "black"?????), "sinners" against the laws concerning foreign exchange - - are worthy of being canonised. The next generation - - I do hope and propose - - will build a temple for such venerable champions.
But: from the sentence: "What is important is that traders should be allowed to buy abroad what and where they will, etc.", I conclude that, au fond de votre coeur, you share my opinion. I add to your sentence merely: "and in the commercial and legal forms they desire".
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Issuing of notes by shops.
Please consider: If the shops transfer the right of issuing notes to a bank (I do recommend that, as you know) then the legal form of the bank is of no economic importance. The bank may be a single banker, it may be a cooperative of the shops which are its members. It may be the mayor of the town (less recommendable), it may be one shop for all others (not bad, I think). All that is not so important. In every case I protest against shops being legally compelled to wait until they find an individual banker, who does this business, and I protest as well against cooperatives getting a monopoly for it.
The legal organisation has, obviously, nothing to do with the question, whether the notes should be made good in gold (at the note's face value or another value) or in other bank's notes (at their face value or another value) or in commodities. (This time at their face value only.)
You are for redemption, but not in commodities. You shall have the right to try the economic possibility of your system and I hope that you let me try my system.
You say, that your plan is more in line with banking tradition. I admit that. But I assert, that this tradition has contributed to bring us there where we stand, and that it is an extremely bad tradition, not better than the more than 100 years old traditions created by the act of 1844.
Let your banks offer the public gold in varying quantities! Let your banks do that, while other banks issue notes, accepted at their face value (counted in gold weight) at the shops. I prophecy that your bankers will get beaten up by the workers, may their system be founded over so well, at least theoretically. But the experience, to which we both apply, must be gained.
You say, that your system is easier to get going. Well - - and I think the same of my system. Experience will teach us.
You say, that your system is more flexible. I think that my system is more flexible. Here, also, experience will teach us.
But I do agree with you, that a system, excellent for times of revolution may not be fit for normal times.
I conclude from your remark, that you find advantages in a system founded on the cooperative principle, at least in case it is started in times of revolution.
Well - - concerning the time after the revolution - - your system shall get all its chances, provided that it fully explains its details, so that every note bearer knows exactly what he may expect from it.
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I expect the papers, which you were kind enough to send to me. I received two issues of the "Unique" yesterday.
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Communist coup to seize Berlin. We are anxious, and I shall buy some victuals.
If Berlin is seized, then the Allies will certainly and at once apply their principle of collective responsibility:
"The subject is an appendix of the government that taxes and abuses him, and not only must he suffer the cruelties of his own government but he shall also be made responsible for these cruelties - - a principle which, I must admit it, is "justified" by the bible. In every case, the supply from the West will cease, if West Berlin is occupied. If !!!!!!
(J.Z.: Compare the present preparations for a war against Iraq, instead of a rightful action only against its despotic ruler, Saddam Hussein, who is not even satisfied with being a tyrant over this country, but prepares mass murder devices, to give him the chance to expand his tyranny. And the "peace lovers" marched by the millions not only, as they did rightly, against a war with Iraq but also against any action directly against him. Hitler loved that kind of pacifists in England and hoped that they would keep England out of his wars. The USA government does not know what "liberation" of a country means. Nor does it know what full liberty and individual rights in the U.S. would require. It cannot think in other terms and conditions than those of territorial "democracies" and "republics" and political party "voting", i.e., conditions, which in countries, as split-up as many are in the Balkans and in the Middle East, do sooner or later lead to authoritarianism, despotism, tyrannies and totalitarianism. The voluntaristic and exterritorial alternatives are kept out of public education, libraries, mass media and academic studies etc., in the same way as individual responsibility is ignored in favour of collective responsibility. Bullets against major criminals are condemned. ABC mass murder devices against their victims are tolerated and even recommended, even while one opposes these devices in the hands of some governments. Oh, the many major wrongs and stupidities of modern politics! They, too, would tend to disappear with the consequences of monetary and financial freedom applied anywhere, perhaps first only in an obscure village or small town. - J.Z., 27.2.03.)
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In my dictionaries I sought in vain a word corresponding to the German: "Groessenwahnsinnig". Toussaint- Langenscheidt's pocket dictionary gives only the subject: "Groessenwahn" = "megalomania" ("Swelled head - to the extent of madness. - J.Z., 24.5.03.) The word must be quite new. In other dictionaries it is not contained, also not in Webster's great dictionary, weighing 4 1/2 kilograms and containing more than 114,000 words. The thing itself was certainly already known at the time of Webster. My edition is of 1880.
Very faithfully Yours - signed: U. v. Beckerath.
(J.Z.: Megalomaniac, megalomaniacal. - My Shorter English Oxford Dictionary, 1966 edition, contains these words. - J.Z., 27.2.03.)
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U. v. Beckerath, … 22. 4. 1950. Your letter of 19. cr., received yesterday.
Dear Mr. Meulen,
that is touching and more than that - - that you will contribute L 10 annually to the costs of a German "Individualist". I thank you very much and will think it over again.
The trouble is: all my friends are either unemployed or as old as I (or older) or fugitives or sick, so that none of them is able to contribute money to a German "Individualist.
Moreover, my views concerning economics are considered as "theoretical", even by my friends. You and Rittershausen are the only people in the whole world, who at least understand me.
There is still another thing. You were kind enough to send to me the photograph taken in the Tempelhof Aerodrome. I found confirmed what Schopenhauer says: In spite of all mirrors, we do not know how we really look. If I would not have known whom the photograph represents, I would not have been able to identify it.
Sic transit gloria mundi - - that is a (biologically) very old man, broken down physically and mentally. And the fellow is, as he looks. It is not probable that I will be alive next year at this time. Winter, with its cold and "Stubenluft" (air of closed rooms - J.Z.) has always and in every year considerably diminished my vital power. I told you, that I suffered a swoon in March, when I was buying something in a paper shop. That was the first signal, I think. Under such circumstances I will not begin a labour of more than a year. I will be very glad if I leave the manuscripts, which I began, in a state so that they may be printed. (I do not know which manuscripts he here referred to. - J.Z., 27.2.03.) I am afraid, that my time is too short. But I am thinking about a German "Individualist" continuously. Perhaps I get an idea before next winter.
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Greet Zander cordially.
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Two days without breakfast and in such a state of health!!!
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Some persons I know praise coffee as a means to regulate digestion, so that they need no purgatives. One of these persons is a woman of 84.
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Very faithfully Yours - signed: U. v. Beckerath.
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23. 4. 1950.
Dear Mr. Meulen,
in the present state of our discussion it seems useful to enumerate some differences.
1a.) You say: Note Issuing is raising loans from the public: every note-bearer gives credit to the banker.
1b.) I say: Note issuing does not raise loans from the public; it is an assignment to present goods or ready services, offered by people, ready to accept the notes by a formal agreement.
2a. ) You say: Not yet manufactured goods (future goods) may serve as a basis of note issuing, except in extreme cases, where the difference of time is as it is usual in forestry.
2b.) I say: Not yet manufactured goods may be financed by other kinds of banking than by note-issuing bankers.
3a.) You say: The main aim of note-issuing is to furnish credit.
3b.) I say: The main aim of note-issuing is to enable the exchange of present goods for other present goods or services.
4a.) You say: The amount of credits, granted by note issuing bankers (honourable, wise, able, prudent, etc. men) is of no influence insofar as fresh issues will never produce a depreciation of the notes.
4b.) The amount of note-credits is limited by the value of present goods, ready services or due debts, whose possessors or creditors are ready or obliged to accept the notes. A banker, who tries to go beyond that natural limit
will see his notes depreciated, even if only small amounts of notes go past that limit.
5a.) You say: Trust is the last foundation of note issue; trust is unshaken as long as the public believes the bankers to be able, honest, wise, prudent, etc. men. Other causes of depreciation of notes than lack of trust are not to be taken into consideration, at least not in normal business.
5b.) I say: Notes obey the economic law of supply and demand. I consent to take "demand" in a very wide sense and to include readiness (obligatory of voluntary) to accept. Notes being, as "things in themselves" worthless paper -scraps, there must always be a demand for them, which gives them value. Demand cannot be replaced by trust.
6a.) Old time experiences are still valid, although in old times the denominations of notes were too large (L 1 being the smallest, as far as I know) to be used as means of payment for wages or for ordinary shopping.
6b.) The necessity to create means of payment, especially for wages and the ordinary consumer purchases, creates quite new aspects, impossible to be judged by the experiences of old times.
7a.) You say: The fact that the largest part of living people never saw a gold coin and only old men and women retain an indistinct reminiscence of gold coins does not influence the desirability to establish a -redemption of notes in gold, although not in par and on demand.
7b.) I say: It is sufficient to observe the value of the notes at the bullion market, the latter to be absolutely free from State interference.
8a.) You say: A banker can issue notes only in the way of credit.
8b.) I say: That is true, but it is only true because the world's legal institutions do not provide for other forms of agreement that are here to be applied. If we had laws sufficiently developed, then it would be possible hire notes from a banker, notes with the obligation to restore to him the notes (notes of the same kind and amount, mainly, or their equivalent - J.Z., 27.2.03.) and not an amount of money equal to the notes. Instead of interest, the banker would demand a fee for the permission to use his notes. But - - I agree - - no court would acknowledge such an
agreement, although it would correspond to the true nature of that business.
9a.) You say: Notes should be in circulation as long as possible.
9b.) I say: Notes should be in circulation only for a short time. The quantity of withdrawn notes should correspond to the quantity of consumed goods, services and paid debts, insofar as they were financed by note-issuing.
The amount of goods and services consumed daily and of debts paid daily might have been, in Germany, in the year 1928, about 200 million gold-marks. If no coins circulated, then an amount of notes of about 200 million gold marks daily must be issued and destroyed. The average time of circulation may be estimated to come to 3 or 4 weeks.
----------------------
These are the main differences which I remember at the moment.
The points on which we agree are, inter alia:
1.) Everybody should have the right to issue notes without cours forcé, the latter word taken in the usual French sense.
2.) The only restrictions should be:
a.) that he finds people who accept the notes,
b.) that he publishes all details of his note issuing, so that everybody who accepts his notes exactly knows or
may know what a note is worth and how it may be utilised.
3.) Other people's opinion, that a man's or an institution's technique of note issuing, or the principle by which that issue is guided, are not right (or the best possible ones - J.Z., 27.2.03) should not be a reason to stop the issue. Experience must decide and the right to decline notes, without having to state reasons, is a sufficient protection for everybody for whom a certain bank may be suspect.
4.) Business, employment and credit should be quite independent from the fact that a nation or a community possesses gold not. The exportation of the last grain of gold or a a general hoarding of gold should be of no influence. To give a nation or a community this independence is one of the most important aims of note-issuing and the right of issue.
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Freedom of issue will soon develop, in every civilised community, right technique and the right principles of note issues. Insofar, it is even necessary to use not only the right methods and principles but to try the others, too. Only by bad experiences with unfit methods and principles can the good and right ones be justified by experience.
Liberty - - the mother, not the daughter of order.
Here we agree completely.
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Very faithfully Yours, signed: U. v. Beckerath.
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24. 4. 50,
Dear Mr. Meulen,
the "Taegliche Rundschau", the daily of the Russian Military Government publishes in its issue of 9.2.50. a report of Scotch miners from a visit to Russia in the summer of 1949. It is said that the report is published by a Scotch trade union of miners at Edinburgh.
That report is very favourable for the Soviets. If the reported facts were true, really one would have to change many views about the situation of Russian miners. Perhaps you have chance to read the report. I defer my judgement until you or one of your friends have read the report.
(J.Z.: There were dozens of such visits and reports by trade unionists. They all managed to overlook the real situation in the Soviet Union, its totalitarianism, its slave labour camps, its absence of trade unions of the Western kind, the absence of the right to strike there and to negotiate wages and working conditions, the low standard of living and much else and fell easy victims to Soviet's propaganda and their Potemkin villages. - J.Z., 27.2.03.)
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Certainly you read that now air mail letters from England to West Berlin and vice-versa are permitted. The upper limit for Berlin senders is 20 grams. Portage 55 Pfennig, that is: 30 Pfg. for the usual postage + 25 Pfg. for air mail.
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In "Truth" of 4. XI. 49., page 506, I found an excellent remark on the Balance of trade. The writer, Jasper Moon, quotes Adam Smith and says rightly, that opinions of average people did not change since the time of Adam Smith. I add that also in the future the opinions of average people (shop keepers, workers, manufacturers, editors, ministers, deputies, etc.) will be the same as they have ever been. The problem for today is, therefore, less to enlighten these people as to establish a state of society where not any part of the people has the right or the power to impose crazy theories upon their fellow citizens, and to take the "practical men" for that, what they themselves believe to be, merely because they - - and they are proud of it - - had never anything to do with science. ("theory".)
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I read again some lines in "The Crisis of Liberty", printed by the "Society of Individualists", 147 Victoria Street, London, S. W. 1. I was unable to find individualism in the pamphlet. But it is interesting and important because it lets us see how far and how deep modern error go. They are shared by people from all parties, people that try to be individualists, others who are Conservatives, others who are Liberals, and others who believe it to be but are not.
At page 16 I read: "The price of liberty today is not only vigilance, it is also sacrifice: the renunciation of some temporary and illusory benefits (the author spoke of tobacco, drink and football pools) for the sake of the future." A man of the street would be right to answer: "Our pleasures are by no means illusory, they are real, but to save money under a government which shares your views and has the power to enforce these views, that is an illusory thing." I would add: not sacrifice is what is needed but resistance against those who have, for years, taken so many sacrifices from us.
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Do you know Gustav Landauer? Before 1914 he played a certain role in Germany as "Edel-anarchist" ("noble or idealistic and non-violent anarchist" - J.Z.). He was founder of the "Der Sozialistische Bund", a little Free-Socialist Union of people who tried to find the right middle ground between Tolstoy, Stirner, Kropotkin and Henry Geroge. In the year 1908, the June issue of "Freie Generation", published by Pierre Ramus, a friend of Landauer, printed the "12 Artikel" of the "Der Sozialistsche Bund. Here is the German text and attempt of an English translation. (Enclosed.) Nothing is said in it of m o n e t a r y liberty.
Landauer became Minister of the Bavarian revolutionary government 1918/19. He was murdered, principally because he was a Jew.
Very faithfully Yours - signed: U. v. Beckerath.
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DIE ZWOELF ARTIKEL DES SOZIALISTISCHEN BUNDES.
("Die freie Generation", herausgegeben von Pierre Ramus, Juni 1908.)
Artikel 1. Die Grundform der sozialistischen Kultur ist der Bund der selbstaendig wirtschaftenden, untereinander in Gerechtigkeit tauschenden Wirtschaftsgemeinden.
Artikel 2. Dieser Sozialistische Bund tritt auf den Wegen, die die Geschichte anweist, an die Stelle der Staaten und der kapitalistischen Wirtschaft.
Artikel 3. Der Sozialistische Bund akzeptiert fuer das Ziel seiner Bestrebungen das Wort Republik im urspruenglichen Sinne: Die Sache des Gemeinwohls.
Artikel 4. Der Sozialistische Bund erklaert als das Ziel seiner Bestrebungen die Anarchie im urspruenglichen Sinne: Ordnung durch Buende der Freiwilligkeit.
Artikel 5. Der Sozialistische Bund umfasst alle arbeitenden Menschen, die die Gesellschaftsordnung des Sozialistischen Bundes wollen. Seine Aufgabe ist weder proletarische Politik noch Klassenkampf, die beide notwendiges Zubehoer des Kapitalismus und des Gewaltstaates sind, sondern Kampf und Organisation fuer den Sozialismus.
Artikel 6. Die eigentliche Wirksamkeit des Sozialistischen Bundes kann erst beginnen, wenn sich ihm groessere Massenteile angeschlossen haben. Bis dahin ist seine Aufgabe: Propaganda und Sammlung.
Artikel 7. Die Mitglieder des Sozialistischen Bundes wollen ihre Arbeit in den Dienst ihres Verbrauchs stellen.
Artikel 8. Sie vereinigen ihre Konsumkraft, um die Produkte ihrer Arbeit mit Hilfe einer Tauschbank zu tauschen.
Artikel 9. Sie schicken Pioniere voraus, die in Inlandsiedlungen des Sozialistischen Bundes moeglichst alles, was sie brauchen, auch die Bodenprodukte, selbst herstellen.
Artikel 10. Die Kultur beruht nicht auf irgend welchen Formen der Technik oder der Beduerfnisbefriedigung, sondern auf dem Geiste der Gerechtigkeit.
Artikel 11. Diese Siedlungen sollen nur Vorbilder der Gerechtigkeit und der freudigen Arbeit sein; nicht Mittel zur Erreichung des Ziels. Das Ziel ist nur zu erreichen, wenn der Grund und Boden durch andere Mittel als Kauf in die Haende der Sozialisten kommt.
Artikel 12. Der Sozialistische Bund erstrebt das Recht und damit die Macht, im Zeitpunkt des Uebergangs durch grosse, grundlegende Massnahmen das Privateigentum an Grund und Boden aufzuheben und allen Volksgenossen die Moeglichkeit zu geben, durch Vereinigung von Industrie und Landwirtschaft in selbstaendig wirtschaftenden und tauschenden Gemeinden auf dem Boden der Gerechtigkeit in Kultur und Freude zu leben.
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THE TWELVE ARTICLES OF THE SOCIALIST FEDERATION.
(Printed in the German language in the "Freie Generation", June 1908, edited by Pierre Ramus.)
Article 1. The basis of socialist culture is the federation of autonomous and economically independent associations, exchanging their products and services, discarding every kind of injustice.
Article 2. Our Socialist Federation will replace State power and the capitalistic economy in the ways determined by history.
Article 3. The Socialist Federation accepts as aim of its endeavours the word republic, in its original sense, the matters of the common weal.
Article 4. The Socialist Federation declares as the aim of its endeavours anarchy, in its original sense, that is, order through voluntary associations.
Article 5. The Socialist Federation embraces all working people who desire the social order of the Socialist Federation. Its task is neither proletarian politics nor class warfare, which are both essential parts of capitalism and the coercive State, but labour and organisation for socialism. (Not State socialism.)
Article 6. The Socialist Federation's real activity cannot begin before large parts of the people have joined it. Meanwhile, its task is: Propaganda and organisation.
Article 7. The Socialist Federation members claim to dispose of their labour products. (J.Z.: More literally: The members of the Socialist Federation want to place their labour into the service of their own consumption. - J.Z., 27.2.03.)
Article 8. The members unite their consuming power for the purpose of exchanging the products of their labour with the help of their exchange bank. (They combined their purchasing power in order to exchange the products of their labour with the help of a barter bank. - is the more literal translation. J.Z., 27.2.03.)
Article 9. They send out pioneers who organise settlements, where all necessary goods, agricultural produce include, are produced as far as possible.
Article 10. Culture is not founded on methods for satisfying wants. Culture is founded upon the spirit of justice. ("mentality of justice" said B. in his translation. - J.Z.)
Article 11. These settlements will be merely models of justice and joyful work. They are not means to attain the proper aim of the Socialist Federation. This aim can only be achieved if the soil and land comes into the hands of the socialists by other means than purchase.
(Peaceful purchases rejected! Rather spend blood for the acquisition of titles to land? - J.Z., 24.5.03.)
Article 12. The Socialist Federation strives for the right and with it the power, to abolish, at the time of transition, the private property in land through fundamental measures and to provide for all citizens the possibility, through the uniting of industry and agriculture, in autonomous producing and exchanging communities and on the basis of justice, to live in culture and joy.
(Hopefully, some better translations are available by now. - J.Z., 27.2.03.)
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26. 4.1950. Your letter of 19. 4.50.
Dear Mr. Meulen,
here enclosed you get an aperient not harmful to the stomach if you use, for one cup of tea,
1 teaspoon camomile-tea and
2 teaspoons of the senna-husks.
The father of my friends, the familiy Bloesz, 84 years old, uses it for years with best results.
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In the Journal de Genève of 21.9.49. I find these figures of a Swiss merchant, Maro Fontaine, about prices at
Moscow in the winter 1948/1949. Fontaine observed the prices when he was in Moscow.
The average workers gets 800 Rubles a month.
"Spezialists" get 1,200 - 1,500 Rubles.
800 : 30 = 27 R. a day.
1 Kilo black bread = 3 R.,
1 " gray " = 4.40 R.,
1 " white " = 7.80 R.,
1 " best " " = 8.40 R.,
1 fresh egg = 3.50 R.,
1 orange = 7.00 R.,
1 lemon = 4.50 R.,
1 Kilo beef = 45 - 65 R.,
1 " pork = ca. 75 R.,
1 " butter = 70 R.,
1 Liter Wodka = 120 R.,
1/2 bottle beer = 11 R.,
1 pair of shoes = 500-600 R.,
1 suit, second-hand. = 2,000 R.,
1 suit, new = 3,000 R.
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Very faithfully Yours - signed: U. v. Beckerath.
(Still more informative were several comparisons, published some time later, on how many minutes or hours the average worker had to work in Soviet Russia and in the USA for ordinary consumer items. But presently I do not have such a table on hand. - A worker's paradise? Indeed not! - But then a large part of the total food supply, ca. one third, under this regime, came from the small plots of land that numerous people were allowed to keep and cultivate, coming altogether only to 3 % of the arable land. The other 97 %, under the mismanagement of government organised and run collectives or cooperatives, produced only about 2/3rd of the internal food supply.
I do not know how long rationing or quotas for consumers persisted there. But for some necessities one had to wait in long lines for hours - where and when they were available and others were simply unobtainable for most people, most of the time. - But then there was a booming black market, although such dealings could lead to forced labour camps and even the death penalty. Its prices should be reported, too. - J.Z., 27.2.03.
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U. v. Beckerath, … 28. 4. 50.
Dear Mr. Meulen,
the question: "Can standardised means of payment, not endowed with cours forcé cause inflation?" is of very great importance. If it would be possible, and if adherents of Free Banking or Mutual Banking must confess themselves, that it is possible, and that only the prudence of the banks can prevent inflation by bank money, then Free Banking or Mutual Banking has no chance. People will say: "It seems that State Banking is the lesser evil. In no case should the purchasing power of wages, rents, pensions, etc. depend upon the banker's prudence, if their own advantage is so intimately connected with note-issuing as it obviously is."
In your book, page 325: "Green proposes to retain the fixed price of gold and to use metal as a standard of value. At the same time he admits that the issue of his money must cause an increase in the price of general commodities."
I will now not speak about the price of gold in form of gold coins. When a country is on a gold standard, the word used in the sense of 1850 and not of 1950, that is, if prices in shops are expressed in gold coins then gold coins have no price. (J.Z.: Meulen never seems to have understood that point. For him prices were always to be expressed in his managed paper-pound. - J.Z., 28.2.03.)
I sought for a passage in Greene's pamphlet, where he expressed his opinion about the inflationary effect of issuing notes without cours forcé. I found at page 65 of the Indian edition, which you were so kind to send to me, this passage:
"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." (Chapter VIII, last sentence.)
Greene uses here the expression "price of the precious metals". As one may see from the preceding passages in the chapter, he means not: "Price expressed in paper money", but, instead, value expressed in its purchasing power, so that other commodities appear as the price of gold or silver. That's no good, consistent and logical expression, differs also from general usage of the language, but in Greene's context it is intelligible. More important is that Greene obviously protests against the assertion, that an issue of his notes can raise the general price level, the latter expressed in gold coins or silver coins.
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Let me add some remarks. Greene shares the general opinion, that the note-issuing banks of his time, restricted in their affairs by the quantity of gold or silver in their vaults, really had the power to raise prices, or - - more exactly spoken - - that an inflationary increase of the general price level by an over-issue of notes - - the word taken in the sense of 1850 - - would be the consequence. I contest even that, although I am certainly no friend of the note-issuing banks at the time of Greene. I assert that cours forcé and nothing but cours forcé of notes is the condition of inflation.
(J.Z.: If they had, as the exclusive currency, no compulsory value but, as a very important monopoly "commodity", nevertheless compulsory acceptance, for all desiring monetary exchanges under the rule of that exclusive currency, then all prices, wages, rents etc. could still be expressed in gold weight values and to that extent no inflation of prices, wages, rents etc. would take place, although more and more paper money of the over-issued currency would have to be paid for them. Then only the currency would be inflated but not the price level. But the enforced value of the cours forcé for an exclusive currency would change that and outlaw stable pricing in gold or silver weight units. - J.Z., 28.2.03.)
Economists of Greene's time, and most of the later times, did not distinguish between two very important kinds of price rises:
1.) a rise starting from a normal and just level. Such a rise is certainly an inflationary one.
2.) a rise from a level, which is to be considered as being too low and which became too low due to a lack of currency. Whenever forced sales contribute to a considerable degree to supplying the market, as was so often observed in old times, then the general price level has become too low. If then a bank begins to operate, i.e., to supply the debtors with currency, so that the forced sales can be replaced by normal sales, then - - it is true, the general price level will rise, but this rise is not inflationary. Modern language has invented a quite suitable word for that: The issue acts "reflationary."
It is technically impossible to exaggerate the issue of notes to which no cours forcé is granted, so that the general price level is noticeably influenced. It is impossible to over-issue notes or cheques. i.e., to issue them without producing additional sales. The over-issued cheques or notes are worthless if they do not exercise purchasing power. (As worthless as tickets to performance for more seats than are available. - J.Z., 28.2.03.)
If in such cases a merchants wants to sell considerably more than he sold shortly before, and if the notes of certain banks are offered (more frequently than usual - J.Z.) as a means of payment, then he gets suspicious. He tells the buyer: "One sees now so many of these notes, issued in these days, as the printed numbers and the dates indicate. - - I cannot judge if they are genuine - - please pay by transferring the amount to my bank. As soon as I get the confirmation, you may get the commodity." - Then the buyer goes to the bank named by the merchant! There the thing is already different. If the buyer is the first man, who brings notes of the kind refused by the merchant, then he may have good look and get the notes accepted. Once the second one comes with such notes, the bank says to him: We get too many notes of this kind. We must first look into what is the matter with the issuing bank. Come back in 2 or 3 days."
(J.Z.: I do believe that it was Meulen, who indicated first to me, possibly in a letter to me, that the note-exchange between banks will be the first indicator for them of over-issues. When after the usual and frequent note exchanges all or most banks have still notes of the over-issuing bank left, after they bought back - or cleared - their own notes against those of the over-issuing bank, then they will know immediately that the over-issuing banks had been over-issuing. At least within city-banks that note-exchange or note-clearing will take place daily. Thus any over-issue would be discovered fast. They would refuse or discount the notes of the over-issuing bank and would publicise that fact. - J.Z., 28.2.03.)
Then the banker goes to the other banker who issued the notes. He begs to look at the books of the issuing bank. If that is declined, the banker says: Well, you have - - of course - - the right to refuse that; but I have the right to refuse your note! Good morning! An hour later the whole town knows, that the bank X refuses to accept the notes of the bank Y and on the same day the note-issue of Y is stopped. That's no theory, that's practice. No option clause protects a bank from this consequence of an over-issue.
When in old times the papers, the authors, the governments, and even bankers themselves, spoke of an over-issue, as a thing really possible, it was only because they did not understand their own business well enough. That could be easily verified, even in Germany, as long as the libraries were not yet destroyed. It was possible to look
at old papers and old books, pamphlets etc. and to see, how funny the views of average merchants and even bankers were, if they had to published their opinions. But also in old times there were people enough who saw the things in the right light and declared an over-issue of banknotes as technically impossible, as long on there was no cours forcé of the notes and opinions could be freely uttered. The best author on the subject was Horn, whose works appeared also in French and certainly can still be viewed in London. (My copy is burnt.) Horn was nearly a fanatic of Free Banking, understood the thing completely and - - at his time, his books maintained a great authority. For you he must insofar be of special interest, as he asserted the possibility to always convert notes into precious metal. (You know, that I cannot share this opinion.)
(J.Z.: I reproduced HORN, J.E., "La liberte des Banques", 1866, 464 pages, 48x reduced, in PEACE PLANS 601 and the German edition, "Bankfreiheit", 1867, 451 S., with a 2 pages comment by me, in PEACE PLANS 333. All of my issues are still in print on microfiche, at least in their latest version. Also some writings by Courcelle-Seneuil and Coquelin. See my literature list on my main website - and many other monetary freedom titles. - J.Z., 28.2.03.)
But at that time not only Horn proved the technical impossibility of an over-issue of notes without cours forcé. Courcelle-Seneuil, Coquelin and - - so I read - - Wilson, the first champion of the "Banking Principle", too. There were still many others, real scientists, which I cannot enumerate here, because their books are burnt.
One may still object: And if, in single cases an over-issue took place, although only for a small amount? I say (with the quoted authors): Then the note becomes, quite obviously, what it really was already at the moment of its
issue: A mortgage bond that does not pay interest. It gets a discount, and after some time it disappears from circulation. Why? The issuing bank's debtors procure themselves the depreciated notes and pay with the notes their debts au pair. Thereby they win the discount.
To what level may prices (gold prices!!) be brought by an issue of notes so far as is technically possible? If it would be granted, that rising prices are, in practice, a "causa occasionalis" to increase wages, I could say: Prices and, consequently, wages can rise as long until the workers in the goldmines learn that in other industries wages are higher than in the gold mines, thus leave the mines and so cause a reduction of gold production. At last gold must become scarce also there, where it is really wanted. Then prices of commodities - - in general, and expressed in gold - - will not rise any longer. Under "prices" are here only understood prices expressed in gold coins.
I disregard here the case where, by bad laws, creditors are entitled to claim gold for due debts. By this a legally produced and additional demand for gold may arise (and often arose in the past), which is to be considered as artificial and has nothing to do with economics. By a law, that creditors are not entitled to claim gold or silver for due debts, but must be content with "local currency" (expression used in the report of 1931, of the Chinese Minister of Finance, about monetary reform in China - - Zander possesses it), this additional, unnatural and disastrous claim and the consequent demand of debtors is discarded.
Let me here state, that all reproaches ever raised against an economy based on money, e.g., by Tolstoy in his book "Money", do exclusively concern that right of creditors to claim precious metal (or scarce legal tender paper money! - J.Z., 28.2.03), without regard to whether it can be procured by the debtors or not. But no author, from antiquity to our time, has observed, that the evils of a money-using society, insofar as money is concerned, only consists in the claim of creditors to money of that kind, which Greene, with a very good expression, calls "Exclusive Currency". Also, all the arguments for communism, from antiquity to our days, are. to 99 % taken from that right of creditors.
To confound money and the claim of creditors (workers, as wage earners included) to money (in form of an exclusive currency - J.Z., 28.2.03.) is one of the most fatal errors of humanity.
In my books I tried, in vain, to direct my contemporary's attention to this fact. But Zander, as long as he was interested in monetary problems, shared my opinion, that the repeal of the laws granting to creditors a legal claim to exclusive currency, especially to gold or silver, would be a social reform hardly to be overestimated.
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I think, that individualists should oppose to the communist demand to abolish money or to replace private money monopoly by a State monopoly, with the demand for
Monetary Liberty.
That liberty means a state of society, where transactions, exchange, credit, employment and any other economic relations of one man to another man, do not depend upon the monetary conditions of others, as far as these conditions can be technically discarded.
20 years ago (about - - I think it was in the year 1932) Zander contributed a very important (perhaps decisive) detail to that "ideal". He said: The last consequence would be, that a debtor, unable to procure local currency - -a case very possible at times of crises - - will be permitted to pay his creditor by certificates, standardised in a manner that their circulation is possible without difficulties, and which get their value by the debtor's obligation to accept the certificates, at their face value, in his business. The debtor should, in such a case, be obliged to compensate his creditor for the trouble of not being paid in local currency. We reflected upon the "surcharge" which businessmen would consider as just. I proposed 30 %, as long as others did not propose other surcharges and give sufficient reasons for their proposal.
I beg to point out my reason. In India an interest of 5 % monthly is considered as just for debts, not to be paid in money but in kind, for peasants in agricultural produce. The experience of centuries has shown, that such an interest is economically possible and does not ruin the debtor. If the credit is repaid within 6 months, the debtor paid 30 % interest, the rule of compound interest not applied. On the other hand, in the laws of Justinian is said, that the interest for agricultural credits, to be repaid in agricultural products, shall not be greater than 30 % p.a.
I estimate that where there is a market for commercial bills, in the average, a bill (certificate) of 1 Pounds + 6 Pence with a text stating, distinctly enough, the debtor's obligation, may be sold for 1 L at least, and that the possessor of such a certificate will, in the average, be satisfied within 6 months. That considered, 30% seems to be a tolerable mean between the 5 % monthly in India and the 2 1/2 % monthly (30 % p. a.) of the Corpus juris. Considering the situation economically, the debtor is in the position of a peasant, who pays his credit not in money but in agricultural products.
Under a condition, where Free Banking prevails, the necessity to resort to certificates, replacing local currency, will rarely occur and will certainly be much less frequent than bankruptcies are under our monetary organisation in times of prosperity. (For calculations 25 % are more convenient than 30 % and that may be a reason to prefer 25 %. 30 % seems also to be a little too much for a society, where a market for such certificates in supposed to exist.)
Paying creditors with certificates, whose value consists in the debtor's readiness to accept them like money in his business, is a method invented and used before I was born. In the Western State of the USA many factories, situated in rural districts, were unable to always provide their workers' wages with USA Dollars. Instead, they paid them with certificates which, in Scotland, in 1843, would have been called "option notes". The factory promised to pay USA Dollars for the note, after a delay of some weeks. In the report I read - - very long ago - - it was not stated how many weeks, also not whether the bearer could claim a compensation for the disadvantage of waiting. The report was from a worker.
Replacing the principle "value by acceptance", for which the brain of most men - - it seems - - has not yet developed cells, by the principle: "mitigate the disadvantages of cash payments by delay", thus introduces time, for which cells in the brain are developed). It does so in the manner of average people for tackling the problem of "liquidity".
("Liquiditaet", in German is the usual expression for a man's ability to pay in cash. A word "liquidity" in this sense is - - I confess - - not stated in Webster, edition of 1880, nor in Muret-Sanders, abridged edition of 1909, nor in Toussaint-Langenscheidt, Pocket-Dictionary (excellent) of 1929, post-war edition.)
In the reported case the workers went to the saloon-keepers and discounted their certificates there.
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In my opinion monetary liberty is the most important right of man and citizen. All other liberties, that of freedom of expression, to vote, to be protected for arbitrary arrests, etc. (1789 rights) are worthless or in danger, if monetary liberty is not realised and history proves that they really disappear in times of crises.
Free Banking is a very essential element of monetary liberty (monetary freedom - J.Z.), but it is not yet monetary liberty itself. Let me here shortly state, what - - in my opinion - - monetary liberty is.
Monetary liberty is:
1.) The right of banking, including the right of issuing notes to the utmost economic possibility, if one likes to use
it.
2.) The right to reject every kind of means of payment, privately manufactured gold coins included.
(Here and in the following, I omit certain necessary additions [B. wrote: "completions" - meaning clauses? - J.Z.], begging to add them in one of my next letters. One of these additional conditions would be that the debtor must inform his creditor in time [at least some days before payment] if he intends to use means of payment not to be considered as local currency, and the creditor must inform the debtor in time, if he intends to refuse certain means of payment which are generally considered to be a local currency. [Abolition of cours forcé.)] )
3.) The right to price goods or services in the manner the possessor himself thinks fit. In paper money, in gold, in silver, in grain, in makuta or in cowries, but at his own risk.
This right may, of course, be restricted by agreements, say, with those banks, which granted loans, to price in fixed value units, say, in the units of the loan granted by the bank. (Additional pricing, in other value units, should not be prohibited. - J.Z., 28.2.03.)
4.) The right to possess all kinds of means of payment and of the commodities to which the means may refer, that is, gold, silver, notes of other banks, foreign-exchange, cowries, etc.
5.) The right to transfer any means of payment freely to any person or group of persons and to accept means of payment. (Of any kind! - J.Z., 28.2.03.) This right shall include the commodities to which the means of payment may refer, as in No. 4.
6.) The right to profit from any public market, to establish such markets and to offer any market facilities to everybody.
The right shall include the right to report details of the business done at the market to everybody, also to publish them, and as well the reports of offers and demands and of opinions expressed by people using the market. The market must be free, especially from State interference.
7.) The right to conclude contracts, in any form, about affairs in which money or money substitutes are provided, may it be as means of payment or as measure of value. The contracts may also provide for the avoidance of payments in "money", say, by an obligation to settle all debts by clearing.
No basis of value shall be excluded, neither gold, silver, cowries, paper money of any kind, nor notes of a particular bank, person or corporation.
8.) The right to prepare commodities, so that they may be used as means of payment, especially to coin gold or silver ingots privately, but - - of course - - with the obligation to stamp on such coins the fineness, the weight, the dimensions (diameter, thickness), the date of stamping and the manufacturer. The coining may be for the own account or for the account of other persons.
9.) The right to oblige oneself or to accept such obligations to buy commodities of a certain kind for a certain period and for certain kinds of money or money substitutes. (System of orders or commitments to mitigate crises.)
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
U. v. Beckerath, … 29. 4. 1950.
Dear Mr. Meulen,
today 1 received
1.) "The Economist" of 8.4. & 15.4.1950,
2.) "Truth" of 14.4.50.,
3.) "analysis" of February 1950, & of March 1950,
4.) "Economic Intelligence" No. 20, March 1950,
5.) "National News-Letter",' No. 716 of 13.4.1950,
6.) "The Free Trader" No. 253, April-March 1950,
7.) "The Literary Guide'', March 1950.
I thank you very much; it is stuff for a correspondence of many weeks.
(The postal stamp was of 21.4.50.)
You read the article "Neutrality for Germany" in the Economist of 8. 4. 50. All written there is interesting, wise and deserves all praise, which may be justified from a literary standpoint.
But: The standpoint here to be taken is a military one and nothing else. The Russians have - - as you know, perhaps from better information than I can get - - more than 2 million soldiers at the Eastern front. The military quality of these soldiers is as good as any - - English and Americans not excluded. Also these soldiers, or the greatest part of them, are sincerely convinced, that a war against the Western powers would be a kind of crusade for humanity, and that if the Kremlin begins the war, it will do it for eternal peace and everlasting happiness by "socialisation". That is a moral aspect, one which outweighs the atomic bombs, which - - perhaps - - are still lacking. How far the Russian soldiers' mentality is spread in Western countries, you do know from the discoveries in the last months, that in the USA, in England and in France some high officials, atomic experts included, are partisans of Russia. Be sure that for everyone detected there are at least 20 not discovered.
In this situation it is necessary, that at least 2 millions of English and American soldiers be ranged at the Eastern front. The question of admitting Germans as soldiers is, at the moment, of no importance. Also it is, at the moment not important to decide, whether the rest of German ammunition factories shall be destroyed or not. If the old Duke of Wellington would command, they would certainly be used exactly for that purpose, which their destruction shall prevent, that is: manufacture ammunition. But every preparation for wars is hampered by errors, prejudices, blunders, etc. on both sides. At the Russian side they will be committed, although we see and know nothing of that.
The main argument against the forming of an army of more than 2 million soldiers at the Eastern front seems to be: We have no money for that. Let me reply: In the Prussia of the 18th century 1/27th of the population were soldiers. And that was possible, although the country was without machines (the word taken in the modern, popular sense) and its production per capita was certainly less than 1/5th of what it is now in Western countries. If the governments insist on the argument: "money is lacking", then they should be pensioned off and, at the least resistance, be hanged. Their successors should study the old Prussian economic system. It was not restricted to Prussia. Several States paid an army still greater in relation to the population (Hesse, for instance) and had means enough to maintain a court whose splendour surpassed that of modern courts. Holland, after she had chased the Spaniards out, was in a similar situation.
Are there still men in England able to listen to such arguments and not to fall asleep at once????? I am really doubtful, if there are more than a dozen, and this dozen, obviously, lives under conditions where it cannot get a hearing.
(J.Z.: With a much lesser effort the Soviet Regime could have been toppled then, by enlightenment efforts and libertarian revolutionary actions. However for such efforts there was then and is still even now less interest than for military actions then and now. One does not have to spend $ 100 - 300 billion in order to get rid of a dictator like Saddam Hussein, if one does not rely on "military actions". Mere arms races have almost always led to war. And at that time all too many people slept complacently on what they thought to be the "security of the nuclear umbrella". - J.Z., 1.3.03. - - A fraction of such military expenditures would suffice to finance and assure either the execution or the capture of tyrants and dictators, sometimes by their very aides. Read what Sir Thomas Moore, once Chancellor of England, had to say on this, in his chapter "On Warfare", in his famous Utopia. - Supposedly the "special forces" of governments are suitably trained for such actions. In merely military actions against conventional forces of the enemy regime their skills are largely wasted. They should aim for the head, for their decision-makers, just as this Chancellor of England, almost 500 years ago, recommended. - J.Z., 24.5.03.)
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At present the situation is this:
At the very hour, When the Russians (their and the other captive peoples' totalitarian rulers! - When even B. used such terms, what can one expect from most others? J.Z.) begin the war, England will be covered by missiles from V(2)-weapons and by atomic bombs. Her home army and the navy will be unable to move and will be without supply. That part of the army which is abroad - - still considerable (yes) will in the meanwhile have killed half a million of Russian soldiers, is a bad consolation. Also, it will be seen, that the effect of atomic bombs (especially of neutron bombs! - J.Z.) upon factories & houses is very different from that upon men. Factories and houses get destroyed in the moment when the bombs explode. The greatest part of men affected do feel nothing in the first two weeks. Then they begin to die and suffer horrible pains. But within the two weeks they will have conquered France (I think France will cede, as Japan did) and Europe.
(J.Z.: Let us assume that of 2 million Soviet soldiers, commanded to attack, 100,000 will be immediately killed by nuclear blasts and that of the rest, say, 1 million are walking dead, with a life expectance of days to weeks only. They might, thereby, become easily quite fearless and aggressive soldiers, much more dangerous than they were without the knowledge that in a few days they will be dead, anyhow. Certainly, they would not be inclined to desert and join the side, which dealt them this fate. In short, nuclear "strength", at least for a few and decisive days, might produce more real, even fanatic enemies than it destroys of assumed ones. At most, after decades of communism, only about one third of the population were convinced. And they were never exposed to the practice and effects of full liberty, which would have won over most of them rather fast. - J.Z., 1.3.03.)
This Europe - - at least 100 million men -- will then work for the Kremlin. Then, perhaps, a 3- year war begins between America and the Kremlin. The end may be similar to that at the end of the 30-year war in Germany: In 1618 Germany had 25 million inhabitants, in 1648 five millions.
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In "Truth" of 14.4.50., I find at page 354 a poem of Yelland:
"The Century of Shadows.
"The Century of the Common Man,
"An Age devoid of heroes
"Where Life's a politician's plan
"For multitudes of zeroes."
And no one of those, who do really already see things as they are, seriously reflects: how to change that. Or - - one must be just - - no one of those, who see the things and have the possibility to speak to their fellow-citizens, is seriously interested. If they would be, then contents of contemporary literature would be quite another one.
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How different are the ("the"? many, perhaps even unusually many, but not all! - J.Z., 24.5.03.) Russians: Always active, always interested, nothing escapes their attention, also not those things that, at the moment, seem to be of no importance, and if they had not that crank (their spleen or their fixed ideas or their indoctrination - J.Z.) in their heads and would not be such fanatics of their crank, I would say: The future belongs to them. But the way of the Kremlin, in case of its victory, will be like that of King John of Abyssinia: By his constant and "educational" wars against his own subjects, he at last reduced the number of male inhabitants so that by some estimate only 1/10th remained. That was 100 years ago.
(Why assume that the internal despotism would remain unnoticed and not resented by its victims, the "different" "Russians"? Flawed ideas can be easily defeated IF a serious attempt is made. Some even thought that the percentage of convinced communists remaining in Soviet Russia was smaller than that in the West. This weakness of that regime, and similar ones, was never sufficiently exploited. - J.Z., 1.3.03.)
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In "City Press" I noticed your mark at the article: "Big US Wheat Surplus Feared". And yet the average man's brain is so organised, that he is able to read that, and then a sheet of the Malthusian, where it is pointed out, that the world has not enough to eat and he finds no contradiction.
(J.Z.: Without the help of a frequently updated encyclopaedia of the best refutations of popular errors, myths and prejudices, most people do not have the time and energy to find the refutations to ten-thousands of them and so they continue to be accepted and practised like "proverbial wisdom". - J.Z., 1.3.03.)
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City Press reports, tool, that "Interest rates hit Japan glove exports." I cannot believe this to be true. An interest of 9 % p.a. for industrial credits is quite normal for the Far East. Certainly, it has seldom been less than 5 % p. a. The little difference of 4 % should stop exports??? If the price of gloves is analysed: wages, raw material, taxes, management costs, etc., then, very probably, the item "interest" would be one of the smallest. But I will believe, that Japanese merchants published in the papers, that an interest of 9 % prevented them from exporting, with the intention of inducing the Bank of Japan to grant them cheaper credits. Very probably, they will be successful. The same bank manager, who neither fears the gods nor the devils nor anything else, he trembles, when he hears "unemployment" and at once grants what the mighty employers demand. (Just compare the billions of bad debts, which these "expert" bankers accumulated, in many, if not most countries. - J.Z., 1.3.03.)
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I read with much interest the marked passages in "analysis". In one of my next letters I hope to write some words about these reports.
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"National News-Letter", No. 716, reports a letter from an American Senator, who will create a federation of Western European countries for Free Trade, and "strong defence organisation". The senator does not see, that countries, that is governments, are by their very nature unable to establish a semi-international Free Trade community and to do anything for defence. When 100 years ago List could organise a German "Zoll-Verein" (Customs Union - J.Z.), the true reason was: Prussia was very large, compared with the other German States, and her government had good reasons to want the whole of Germany as a market.
What is needed and what senators will hardly see, is that private organisations are the first line for a strong defence. Do you know of one man, who listens, if another man talks to him about such things?
(J.Z.: How many libertarians and anarchists are now prepared to serious listen to talks or study writings about defence, liberation, revolution, from a libertarian or anarchist point of view? - J.Z., 1.3.03.)
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Very astonishing the speech of Princess Margaret, printed in Free Trader No. 253. (Was it her speech or that of a ghost-writer? - J.Z.) It reminds me of another woman of royal blood, which found words of reason and humanity, in a world where bloodshed seemed to be the most reasonable thing: Queen Christina of Sweden, the daughter of Gustav Adolf. When she was 18 years old, she ordered: That war in Germany is to be stopped. I and my subjects, we got enough of glory; now we want peace! You, Chancelor Oxenstjerna, begin at once the pourparlers of peace. The Chancellor had to obey and the world got the celebrated peace of Osnabrueck ("Westfaelischer Friede", in 1648).
The princess should know something of Free Banking, the logical consequence of Free Trade.
(J.Z.: Not merely a consequence but also a pre-condition. Essentially, with both extended to their logical limits, the two are identical, like the best forms of capitalism within enterprises are identical to the best forms of voluntary socialism within enterprises! - J.Z., 1.3.03.)
Bismarck spoke of the "erbliche Nullitaet" of the English Royal Family. Whatever may have been the opinion of that, it is no more justified vis-à-vis such a princess!
(J.Z.: And what did the great abilities of Bismarck lead him to? To help create a protectionist German empire, involved in all too many wars, that later led Germans into WW I and II and never solved any of its remaining major problems. He was also the first major promoter of the modern "Welfare State". - Such "leaders" have no good reasons to look down upon others. Their value is not zero but, rather, negative. It was not the English Royals that favoured air raids against civilians but, rather, "great" leaders like Churchill, in spite of his numerous historical studies, who thereby prolonged the war and made it more bloody on both sides. - J.Z., 24.5.03.)
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About the article: "Scepticism and the search for certainty", in "The Literary Guide", March 1950, I hope to write in one of my next letters.
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30.4.50.
I just got a letter from Rittershausen, which informs me, that he became a professor at Mannheim and will begin his lectures on 8.5.50. Provisionally, he keeps his lodging at Frankfurt and uses his car to ride to Mannheim, on the days when he must deliver his lectures. (1 1/2 hours and the same time to return.) The "Wirtschafts-Hochschule" at Mannheim enjoys a good reputation. Please, tell this to Zander, if you see him. The best is, that Rittershausen will get more time for a second edition of his book: "The Other System". From the "samples" that I saw, I know that it will be the by far most valuable economic book of the last 20 years.
(J.Z.: As far as I know, R. had ceased to work on this because he could not get it published in time, before the currency reform of 1948. I microfilmed his manuscript. - J.Z., 1.3.03.)
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Very faithfully Yours signed: U. v. Beckerath.
____________________________________________________________________________________________
5. 5. 50. Your letter of 1. 5., received yesterday.
Dear Mr. Meulen,
I just bought for 50 Pfennig a German translation of a biography of Sir Robert Peel, by G. Kitson Clark. Not bad - - as it seems - - but the Act of 1844 is only mentioned in 5 lines. (Number of pages in the book: 122.)
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Let me point out the difference
1 b.
There are two legal reasons for which a payment - - the word taken in a very wide sense, so that clearing is included - - is deferred:
1.) The creditor waits and expects payment,
2.) the debtor waits for his creditor to accept and take what he is entitled to get and what is ready for him.
The latter is, what German lawyers call "Glaeubiger-Verzug". (I do not know the English expression.) (Literally: Delay caused by the creditor. - J.Z., 1.3.03.)
The most simple case is when a shop pays with tickets to be realized in the shop. The firm Meinl in Berlin, Leipziger Strasse (head office or main shop of a chain store? - J.Z.), often paid, in 1922-1924, with tickets of 1 Gold-mark, 10 Gold-marks, etc. The commodities in Meinl's shops were priced in Gold-marks, too. (Victuals, coffee, tea, wine, etc.) The shops of Meinl waited for the bearer of its tickets to buy something in the shops and to pay with these tickets. The earlier the bearer brought his tickets to the shop, the more satisfied was Meinl. Certainly, the bearer gave no credit to Meinl. Also the bearer was not entitled to receive money. He was entitled to receive commodities sold in the shops.
It seems that the expressions "creditor" and "debtor" are not the best to express the legal situation of Meinl on the one side and of the ticket-bearer on the other. In German fit terms would be "Verpflichteter" (obliged person - J.Z.) (Meinl) and "Berechtigter". (entitled person- J.Z.) (bearer.)
As soon as several shops like Meinl unite (the best legal form is still to be discussed), so that a centre issues the tickets, which every one of the united shops accepts like money, things change very much, legally, because our present legal system is not prepared to acknowledge that legal form which would, in the bent way, correspond to the true nature of this business.
Economically, it is still the ticket-bearer, who lets the other wait, while the things destined to satisfy him, are ready to be handed to him since the moment when the bearer got the tickets. Therefore, economically, the bearer is no creditor.
Although not in every case but in this case the Roman rule must be applied: " Summum jus summa injuria": The concern must have the right to make good the ticket's face value (say) with 100 % in the first week (I would say, at least month to 6 months! - J.Z., 1.3.03) after Meinl used the ticket as means of payment (say, to Meinl's employees for wages), with 98 % in the second week, with 96 % in the third week and with 2 % in the fiftieth week. In the 51st week Meinl would not longer be obliged to make good the ticket. (You will not take the here used numbers too serious, others will be able to propose better numbers.)
The economic reason to deduct some percentages, if ticket bearers let Meinl wait a very long time (a weeks is hardly a very long time! - J.Z., 1.3.03.), is that Meinl must pay rent, insurance premiums, supervision costs etc., while the ticket- bearer lets Meinl wait. Thus a superficial resemblance may arise with the money system of Silvio Gsell, which you know. The best solution is that of Professor Milhaud, who proposed to declare such tickets as void after some years, say three years or five. (J.Z.: I would rather favour 6 months or one year. - J.Z., 1.3.03.) But within the 3 or 5 years the tickets should be valid for 100 %.
The banker, under the present legal system, has no other legal possibility to do business with the shop than to lend it the tickets, or - - as judges would say: to loan it the tickets. For every time, when the banker loans tickets to
the shop, the banker is - - of course - - entitled to a commission. For the banker it would be ideal, if the following would be possible:
A.) The banker loans (lends) to the shop 1,000 L.
B.) The same day the shop uses the tickets as means of payment for wages, for goods which the shop will sell, for rent, etc.
C.) 24 hous later the receiver of the tickets bought something and used the tickets as means of payments in the shop or the recipients found others, who accepted the tickets and these others bought something and used the tickets as means of payment in the shop or they found still others, who accepted the tickets and these others bought.
D.) The same evening the shop brought the tickets back to the banker. So the shop avoids the interest, which in this business must be so high, as to induce the shop to bring the tickets back as soon as possible.
E.) Again, the banker loans 1,000 L to the shop and gets his commission.
The interest charged in this business must (or should) be distributed among the banker's customers. The scale of distribution should be so, that shops which do repay their loans very fast get all interest back, so that for these loans Proudhon's ideal is realised: "Interest practically zero!"
I thinks that, already by these few details, you will see the complete difference of a note issuing being on the principle, which in Germany is called "Glaeubiger-Verzug", and which - - of course - - is contained in the legislation of all countries, from the principle, where the creditor waits and for his waiting gets interest. All note theories - - I am afraid that of W. B. Greene included - - are until now based on the principle "The creditor waits". But this principle became impossible for our time as far as note issuing is concerned.
Of course, I can and I do not expect that such a revolutionary and new principle will be accepted only because one of its adherents speaks and writes about it. Hard economic blows are necessary to make the principle clear and to let us finally realise, that it is the only economical possible one in our time.
What I explained in the foregoing lines is the result of long discussions with Zander.
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2b.
What you say in your book on pages 230 - 235 is all right and good, but it applies to bankers in general and provides no defence for financing the loans you defend by note-issuing.
I say: The credits here to be granted should be granted by those, who give the substance of the credits.
Nothing can be created from zero and even God - - if the biblical record is true - - found a substance (water and. probably, other things, useful for a creation) which existed, before he began creating.
If note-issuing is an element of financing long-term loans, then it may only be used in the following way (which I explained in my books).
Suppose, Meinl sells not only victuals, coffee, tea, etc. but also bonds, to be repaid by the usual sinking fund method. Meinl sells such bonds for a total of 10, 000 L, bearing 1/2 % monthly interest, and to be redeemed in 10 years, by 120 equal payments for interest and redemption.
The tables of compound interest show, that the debtor of such a bond must pay monthly 111 L. That means, in this case, the bearer of the bond is entitled to use the 120 coupons of 111 L each (subdivided into 111 tickets of 1 L each) every month. Every set of 111 L. bears an option clause. It says: Not to be used before such and such a date.
The nominal value of the bonds bought from Meinl is: 120 x 111 = 13,320 L. and the price is: 10,000 L.
The 10,000 L. received, Meinl may lend out on terms corresponding to its own obligations, but so that Meinl gets a profit and an equivalent for its risk. It may charge, say, 3/4 % monthly interest, so that Meinl's debtor must pay monthly, for interest and redemption 126.67 L.
'The right means of payment would be that Meinl's debtor applied the same system of payment as Meinl itself applied and says: Come to me and buy monthly for 126.67 my commodities. Here are tickets for this amount.
I gave some details in my books and in former letters to you.
In every ease it is possible to wind up the business without any use of precious metal.
(J.Z.: Alternatively, just before any of the monthly repayments is due, Meinl could itself issue new Meinl tickets to these monthly amounts and they would then soon stream back, directly or indirectly, in debt repayments from its debtor. Meinl's tickets, being the banker in this case, would be more widely acceptable than the debtor's. Likewise, in the original subscription to the loan, by the bond buyers, they might use Meinl tickets, which they had accepted in their sales of labour, services and goods, and want to invest on the offered bond terms. So, the long term loan is not directly granted by Meinl in its tickets, but by its savers and investors, using the earned Meinl tickets for this purpose, just like they would use e.g. earned legal tender for this purpose. - J.Z., 1.3.03.)
A very important difference, between my system and yours, arises:
In your system the notes lent (here 10, 000 L.) remain in circulation and are diminished in the measure as the debtor redeems his debt. After 120 months the last note has disappeared from circulation.
In my system the debtor gets 10,000 L but he must use them (or others must, who got the notes from the debtor) as means of payment in the shop. So the last note disappears in very moment when the debtor has used all the credit for what it was destined, say, buying machines (if the machine factory accepts Meinl's notes), etc.
A single shop cannot do much in this fields but a union of shops can do much. This union may be called a "banker".
In your system arises the question: When is the circulation so filled with notes, that no further notes can be issued? For England you may estimate that the notes may be issued at thrice the amount which is issued now by the Bank of England, perhaps even the tenfold amount, but, certainly, there is an upper limit merely by issuing notes for former credits. (for long-term credits of the former kind? - J.Z., 1.3.03.)
(J.Z.: Even now there are limits for the total note circulation to the total capital assets. All these capital assets could not be monetised in form of notes, without causing an enormous inflation. Thus, if in the Meulen system, future and additional capital assets are already to be anticipated, by additionally note issues for loans, granted on long terms, in these new bank notes, in a 1 : 1 proportion, then the previous proportion between total circulation and total capital assets would be disturbed, in the direction of an additional circulation that is neither "balanced" by immediately available additional productive capital [still to be provided by that long-term loan] nor by ready for sale and additional consumer goods and services. Nevertheless, with that kind of additional and long-term note issue, additional purchasing power is put into circulation, if everybody would readily accept it at par. But then, why should they be so foolish? These means of exchange are not their own, i.e., those provided by the producers, goods and service providers. They are merely nominal claims upon them, which the owners of these goods and services ought to be quite free to either refuse altogether or to discount very greatly. They would accept them only if they were greatly under-supplied with exchange media and if no well publicised competition by sound other exchange media and value standards would exist. If one thinks only in terms of an exclusive currency, with its forced value, then one omits such considerations. But if market forces and full freedom of contract and trade are coming into operation, here as well, then issues of Meulen's type would no longer have any great chances for success. His tickets have no immediate purchasing power corresponding to their total value. One can only, gradually, repay the loan with them. For all others there is no natural and enforced acceptance for them, unless they are given forced acceptance and forced value for everybody in the State. - J.Z., 1.3.03.)
In my system such a limit by former credits does not exist, although (of course) a limit exists by the limited quantity of iron, coal, etc., labour, which is given for every country. (I do not find his term "former credits" clear enough. I presume, that he meant "long-term credits of the former kind, granted all too freely in form of additional note issues". - Perhaps the term refers to the use Meulen made of it in his letters. I have not yet compared the corresponding letter of Meulen. -J.Z., 1.303.)
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4 b. (I presume that these subdivisions refer to those of Meulen in his letter. - J.Z.)
All wisdom does not help, if the natural limit is reached.
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5 b.
"satisfaction there". That is the point which.
You say: What I offer as a satisfaction will be received as a satisfaction.
I say: There is only one way to satisfy note-bearers: Tell them: Use the notes as means of payment in that and that shop.
Experience will teach us.
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9 a.
"cash reserve". I demand, that credits shall be possible at the usual terms, if there are cash reserves or not.
My emancipation from precious metals is 100 %, yours is much less.
(J.Z.: Precious metals as exclusive value standards, as exclusive exchange media and as exclusive or main redemption goods. Note that B. favoured free rare metal coinage, free rare metal markets, free circulation of gold coins etc., free clearing and accounting using gold weights and their market value as value standards, free contracts of all kinds regarding them, but wanted merely to abolish their legal monopoly position, especially the legal right to demand rare metals - or legal tender - from a debtor who is not well enough supplied them but who could always pay with certificates that he is obliged to accept at any time at par from anyone. - J.Z., 1.3.03.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
6. 5. 1950. Your letter of 1. 5. 50.
Dear Mr. Meulen,
I agree: "… or in currency that USA will accept at par." (Page 2 of your letter.)
But there is a real possibility to pay in Dollars, if the restriction is discarded: "Dollars of USA - origins."
(J.Z.: The "dollar" does not have to be the means of payment. It may merely serve as a value standard. Then it would still be a value standard originating in the US, even the exclusive one there, in its current depreciation. - J.Z., 1.3.03.)
The commercial bill may contain the clause:
"The bearer gets so many pounds, as 1,000 Dollars are worth at the London Exchange at that or that day. (Or an average of quotations.)
Or the commercial bill may contain this clause: The bearer gets as many Dollars as that and that amount of Pounds is worth at the New York Exchange.
Please, do not suppose that in every case the L will get depreciated by the method I suggest.
(I cannot and will not think that I am the only being in the world which proposes such a simple and easy method.) Consider, that there is no official purchase price for gold in the USA. The law merely states: The government pays 35 Paper Dollars for 1 Troy ounce of fine gold. The Dollar, therefore, is by no means a gold dollar.
Such a bad currency will not always be preferred to well managed English Pounds.
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At Dunkirk there was no market for Pound Notes, the word market taken in the usual commercial sense. I wonder, that the depreciation at a commercially so isolated place was not greater than 20 %. Towns without a market are commercially isolated, even if daily 100 steamers land there.
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The Twelve Articles" were not from Pierre Ramus but from Gustav Landauer, who published them first in the "Socialist". From there Pierre Ramus reprinted them.
I do understand that Pierre Ramus did not impress you. Neither you nor I can be impressed by a man, who calls himself an anarchist but does not know what monetary freedom means. Such a man is not better than a State socialist. He believes to be something and is nothing. (Not enough of an anarchist! - J.Z., 24.5.03.)
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Your argument concerning the unwillingness of the USSR is very convincing. It should be constantly repeated, and this at quite short intervals. The first thing that a Russian revolution should do is declare: Russians, do go abroad as far as you can. Visit all countries. Publish what you see abroad. Our - - the Russian Revolutionaries' - - aim is to surpass all other nations in productivity and social conditions. This can only be achieved, if we know what has been done abroad.
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In the "Individualist" much is said about unjust taxation. I think that Individualists should propose themselves a just system of taxation. Until now this has not yet been done. (See in my main literature list under: "Voluntary Taxation". - J. Z., 1.3.03.) One of the first reforms should be: Paying taxes by notes, so that, when the government spends the notes, employment is created. (J.Z.: ??? Government cannot create productive employment - although it can prevent it. Ever tax money surrendered to the government means a confiscation of the corresponding labour product and its handing over to the politicians, the bureaucrats and their favourites, for them to spend or waste. Just to survive, many people work harder or longer or in two jobs, and only in this way extra labour is enforced. If the government does not provide sufficient notes to pay taxes with, then in this way it causes unemployment. To the extent that, afterwards, it supplied enough notes for this purpose, the prior employment situation is restored. But additional and productive jobs are not provided by government spending, which always means prior taxation or loans or the watering-down of currency, i.e., others lose correspondingly and are prevented from spending themselves what they do thereby lose. - J.Z., 1.3.03.)
The second reform was proposed in Russia (I forgot the author) about 90 years ago. To every taxpayer should be stated on his tax bill:
For the army: A L. For central planning:. B L. For … etc., etc. So that the tax payer knows, to what extent he contributes to statism.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
II.
6. 5. 1950. Your letter of 3.5., 'received today.
Dear Mr. Meulen,
certainly, Greene is a "rara avis" (rare bird - J.Z.), but concerning his attitude to gold as a measure of value, he was d'accord with the best economists of his time, who - - a rare case - - agreed with the just opinion of the public, that precious metal is a better measure of value than any other commodity. I think that if an economist like Tucker agreed here with Greene ("Instead of a Book", page 232), the latter's opinions deserve to be accepted with a favourable prejudice.
(I do not enter into the question, whether silver is better or gold. For us the question has been solved long ago: Whoever prefers silver, prices in silver, and whoever prefers gold, prices in gold.)
You refer to pages 36 - 38 of the Indian edition of "Mutual Banking". But my impression is, that in these pages Greene did not prove an influence of Mutual Money on the purchasing power of gold or silver, but on the contrary, did prove that such an influence does not exist. Greene expresses this opinion as well at page 65 of the Indian edition, in the sentence:
"Mutual money is measured be 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. "
By the words "price of the precious metals" Greene does not mean a price expressed in paper money or in notes of some bank. What Greene means, he expresses clearly on page 59, where he says:
"A fall or rise in the price of money, and a rise or fall in the price of all other commodities besides money, are precisely the same economical phenomenon."
Tucker is - - I think - - quite right when he says (p. 232): "This is one of the most important truths in finance,
etc."
The expression "mutual money" here should certainly not be understood in the sense of "notes issues by a bank run by a committee". If the issue is watched by a committee or by a single person is subordinate concerning the economic and monetary property of the notes.
The words "fixed paper price of gold", line 3 of your letter, lets me suppose, that you mean: Greene demands that his notes should always be in a fixed relation to gold (or silver), the relation being determined by law or by the provisions of the issuing bank. It is important to know what Greene really demanded. He demanded, that the face value of his notes should be in Dollars, but that the notes should not be convertible into metal dollars at the bank. At page 37/38 Greene says: "The bill of a Mutual Bank is a bill of exchange, … payable at sight, but only in services and products."
To convertible notes (convertible into precious metal) Greene ascribes the power to influence prices, in page
57 and other passages. (I think, he overestimates that characteristic.)
(J.Z.: Assume that 100% gold cover is promised, but that in practice only 1/3rd of the "gold certificate" notes are actually covered by notes, also that, for a time, based upon misplaced trust, the 2/3rds of uncovered notes are accepted on faith, trust or confidence, however unwarranted, and not, e.g., upon sound commercial bills or "real bills". Assume further, that such notes make up all or the greatest part of a country's exchange media. Then these notes would have trebled the gold coin circulation that they did replace. That would have an effect upon prices, unless generally deflationary conditions prevail. Insofar I do agree with Greene here. But, an exclusive gold coin circulation amounts almost to a definition of deflation and, in most countries, even the threefold circulation [in soundly issued and returning notes] would not yet act inflationary, even if they were given legal tender power. All that they might do would be to increase the pre-existing emergency sales prices somewhat closer to the prices that would prevail under the practice of full monetary freedom. - J.Z., 1.3.03.)
I do regret that Greene did not clearly point out when, at the bullion market, his mutual notes would get a discount. To assert, as Greene did, at page 63, line 2, that a discount is impossible, is going too far. A mighty banker, an enemy of the Mutual Bank, might buy a great number of notes and then demand a quantity of gold at the bullion market, which is, at the moment, not at hand. Suppose, there is a little town, one of 10,000 inhabitants, which has a Mutual Bank. The issue of such a bank can hardly surpass 500,000 Dollars. If now an enemy of the bank buys, secretly, 100,000 Dollars and on the next day demands (from local gold sellers - J.Z.) 1672 kilos of gold, 9/10th fine (which corresponds to the gold contained in 100, 000 Dollars [in gold coins - J.Z.] at the time of Greene), and offers as means of payment notes of the Mutual Bank, then, certainly, these notes will get a discount. The question is: To what degree and for what time? If the banker says: I want gold within the next hour, coûte que coûte, the discount may be 99 %, if the town does not possess more than 16.72 kilos and the owners of gold want to profit from their situation. But if the banker has spent his 100,000 dollars in notes of the Mutual Bank, all people say: The man was crazy! If he would have bought the gold by and by, and not here, but at New York or at Frisco, he would have got 1672 kilos. And at the hour when the demand of the crazy banker ceases, the notes are taken in the shops at par, as before. And why ? 'Because the shops are debtors of the bank and are obliged to accept the notes at par as long as they are debtors.
(J.Z.: Moreover, this crazy banker will be distrusted from then on and lose customers. Shops might continue to accept the notes at par, although, temporarily and on this local and limited gold market, they are no longer at par. Moreover, if one fifth of such a small circulation is gradually hoarded and temporarily withdrawn from circulation, only to be offered later and this quite suddenly and only on the local gold market, then, unless additional notes are issued, to make up for this artificial shortage of exchange media, a temporary shortage of the Mutual Bank's notes will appear, which will assure their par value, at least at the shops, if not even a temporary small agio, due to the demand for the notes exerted by debtors who want to or have to repay their debts with them, unless the are prepared to pay a small penalty for paying them with other means of exchange. - J.Z., 1.3.03.)
You must consider: Your proposition of an invariable standard of value was quite unknown at the time of Greene. It is still unknown and not yet discussed. I admit, that it may be better, than the 1913 method of pricing commodities in gold coins. The suppositions of the new unit are to be investigated. But, even if you consider gold coins as a bad and unstable standard of value, you will admit that it is a possible standard of value.
Call it a "rubber money", as Irving, Fisher's Dollar was called by the Americans. But gold coins have existed for centuries and have done their work as a measure of value, and this so well, that the people always returned to that standard, if this is not prevented by hard punishments, as is presently the case in England and in Germany and in the USA.
(Here I do not consider your philosophical improvement, that not the gold coin is the subject of appreciation but the desire to use it or to possess it. Certainly, you are right and your standpoint is less refuted than confirmed by the fact, that gold coins did their work, although the psychological side of their function was not understood.)
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You say: Under freedom there is an automatic check on over-issue by one particular bank, namely the system of clearing.
If the notes of Mutual Banks are not convertible into specie, these words taken in the sense of 1913, they are not a subject of clearing in the sense in which you mean the word in your letter.
The clearing of notes, of which you speak (e.g., the Suffolk System in the USA, 120 years ago, or the note clearing at Edinburgh or at last in other towns), supposes an obligation of the issuing banks to redeem their notes in specie on demand. A mutual bank does not possess cash reserves. (Greene, page 62: "… as they have no metallic capital, and never pretend to pay specie for their bills ...")
(J.Z.: Meulen may here have had another kind of clearing in mind, namely, a literal exchange of those notes which each bank had accepted from the circulation of notes of other banks. They are all IOUs of a kind, and their literal exchange would have cleared them against each other. Small and insignificant imbalances could always be carried over to the next note-exchange. If one among several note-issuing banks had managed to over-issue its notes, then all the other banks would have received more notes of this over-issuing bank than it could offer them in return in form of the notes of the sound banks. Those who had accepted this excess and would notice this excess very soon, during the first note exchange, would thereby be induced to discount or refuse the over-issued notes and would also make this fact very well known and very soon, too. None of the banks participating in this form of note-clearing, would have to be under the obligation to redeem its notes in gold coins. - J.Z., 1.3.03.)
I spoke in former letters of the method for avoiding a discount of Mutual Notes on the bullion market in a free community. I use here the word "Mutual Notes" to denote the economic and monetary system not the quite indifferent detail that Greene preferred a committee as a manager. You prefer a single manager and your reasons
are well founded.
You know my standpoint which, here, too is: liberty! - - He, who prefers a committee-bank may use it, and those, who decline it, may use banks of other legal shapes.
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What you say of Horn true. He demands convertibility of notes at their face value and at demand. That's in the long run impossible. But that Horn demands the abolition of all State supervision in honourable for him.
You yourself demand a cash reserve for your bank. You do not demand a fixed relation of notes to your cash reserve. But - - I think - - you must demand an upper (lower? minimum? - J.Z., 1.3.03) limit. If a bank issues notes for 1 million L and possesses only for 100 I. in cash, you will - - I think - - believe that proportion to be too small. What proportion do you believe to be tolerable?
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That you knew Wesslau personally is very interesting. The people you knew personally - - Pierre Ramus, Wesslau, Tucker - good, old, noble Tucker - - and so many others! You should write a little book: "People I knew", and preserve your impressions for the next generations (provided there will be such generations).
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I hope to say some words on the Hake & Wesslau-System in one of my next letters.
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(You know the booksellers' rule: Books on personal matters are bought!)
The Russians announced an attack on West-Berlin at Whitsuntide. (What kind of attack? - J.Z., 1.3.03.)
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
7. 5. 1950.
Dear Mr. Meulen,
I received yesterday:
1.) National News-Letter, No. 717 & 718 of 20. & 27. 4.50,
2.) "The Economist" of 22. 4. 50,
3.) "The Malthusian", January and March 1950,
4.) "The Literary Guide", May 1950 & March 1950,
5.) "Truth", 13.1.1950,
6.) "City 'Press", 28. 4.1950,
7.) A cut from "Sunday Graphic", 19. 3. 1950, page 7/8
8.) " " " " " , " " 9/10.
I thank you very much.
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Stephen King-Hall speaks in NNL of 20. 4. of "The Revolution in Asia". It's a rule that things are not so simple as thinkers represent them, but this time the contrary is the case: The true reason of Asia's revolution is more simple, and it was foreseen many decades ago. In one of my burnt books I read: England and well as France produce in Asia daily some hundreds of young men, knowing all what the excellent English and French Schools and Universities may teach intelligent and knowledge-thirsty young men; but, after they have left the schools and the universities, they do not find employment. For the greatest part there is only one kind of existence economically possible: becoming revolutionaries, writing for revolutionary papers and selling them. And it would have been easy to provide work for the young educated Indians, productive work, in factories, as helpers in "scientific management", in the growing cooperative movement as secretaries, and many other. Also, the ignorance of the Indian people being still very great, the young could have been employed as teachers. All these possibilities were used very imperfectly.
Besides that, all is true what Stephen King- Hall says, but it is not of primary importance.
As long as Communism or Etatism says to the educated: I employ you as officials, you will always get work - - ill-paid - - yes - - but always work - - as long as that is the case, young people will be sincere Communists.
(Rather, opportunists. One should not omit to mention that in State schools they are largely taught state socialist ideas from state socialist teachers. - J.Z., 1.3.03.)
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In NNL of 27.4. the Editor prints the percentages of National Income which are now spent for military purposes.
USA = 6.4 %,
UK = 7.6 %,
France = 4.9 %, etc.
Let me remind you that rarely in history was such a low percentage of the social product spent for military purposes. In old Greece and in the Middle Ages, every man was obliged to buy or procure himself weapons and to a considerable percentage of his time on military exercises. Certainly, in no case was the percentage of productive power less than 10 % and often it may have surpassed 25%. And yet the Western powers find difficulties in placing an army of 2 million men a the Elbe-front. (These men expect to be highly paid and their arms are no longer as cheap! - J.Z., 1.3.03.) Russia does not find such difficulties, or she meets them with the Kremlin's usual energy and intelligence, always guided by an unequalled interest in the own affairs, an interest, which is lacking in all other governments.
(J.Z.: The Soviets paid their soldiers much less and had the most severe military discipline. If they had really been interested in their own affairs, would they have upheld their economic and political interventionism for as long? As voluntary and exterritorially autonomous experimenters they could have practised their ideas among themselves, with voluntary supporters only, encountering practically no other resistance than that which they caused among themselves with their own measures. People only interested in a spleeny system like theirs, are not really interested in all their rights and liberties, all their abilities, all their development potential but are, just like some religious fanatics, altogether on a wrong track. To the extent that they would not meddle with the affairs of non-members, and would not terrorise members, they would have the right to remain on the wrong track as long as they can stand it. - J.Z., 1.3.03.)
If the Western race is not yet destined (I oppose both terms in this connection. - J.Z., 1.3.03.) to disappear from the world's surface, it must now see:
1.) Governments are not longer able to defend the liberty of their peoples. (Were they ever and did they every genuinely defend "liberty"? - J.Z., 1.3.03.) The only thing that they do know and what they want to do, for the last few decades, is: restricting the liberties which they pretend to defend (and certainly, they seriously believe to defend by their methods).
2.) The time has come, for private associations of men, sincerely interested in their own liberty, to preserve their houses and other property, to secure a promising future for their children, to do what governments are unable to do.
The great change must be introduced by a "miracle", which is no longer a miracle in the Eastern countries but would still be in the Western ones: Two men come together and talk more than two hours about this problem, not of beer, cigars, prices, women and the weather. From such a discussion may arise a future. Do you know such men? I don't.
But look at Russia. In a very interesting novel: "Abschied von Sowjet-Russland", published in the "Tagesspiegel", about 2 years ago, the author described the new type of Russian girls of the "higher classes" - - and my impression was: he knew something of what he described. (Now I remember the author's name: A. Rudolf, and the novel was first published by the "Schweizer Spiegel Verlag", Zuerich, Guggenbuehl and Huber.) A young Western communist, who later fled from Russia, had to do much with Russian girls, as it is natural. But he was terrified, when some of them, at the morning of a night of love, began suddenly to talk of l5-year plans, of increase of production in that or that factory, and such things. When I read that, I was terrified, too. I thought, that the here
existing danger is much greater even than the danger from Russian atomic bombs. So interested are the new born Russians, of "higher classes", in economic affairs. You know what our youth is interested in. Let them choose: Talk one hour a day about the themes about which Russians talk with interest, or become slaves, like the lower classes of the new Russia are. They will, very probably, say: No - - talk about such things - - that is too terrible. Rather become slaves!
(J.Z.: How much can one trust reports of individuals in their memoirs or novels? This defector was probably, then and there, under questioning by a female KGB agent, to find out whether he was a "true" communist. That he defected again, demonstrated that the suspicion of the KGB was not unjustified. Many girls were forced into such activities and so were many men. Talking about subjects the government wanted them to discuss was also a safe subject for these spies. If they tackled dangerous subjects, then they themselves could have come under suspicion. This way they did not have to denounce anyone, either. As a statistician, B. should not have generalised too much from this literary work. Open talk, in private, was only possible among Russians who knew each other and trusted each other for a long time. Otherwise, they talked about the propaganda pap, with which everyone was only all too familiar, having heard the same old stories over and over again and read them over and over again. - J.Z., 1.3.03.)
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I read with much interest your letters of 3.12.49. and of 13.1. 50, to the Editor of Truth. (I took a copy of the letters of 13.1.50. and return them, because on the backside there is a part of a hand-written letter.)
My opinion about the UNO-Constitution is: "The principle is a very bad one and must produce bad effects, such as were seen from the first beginnings of the UNO. The UNO must be replaced or completed by private Unions. (Federations, Leagues, Alliances, might be better terms. Trade unions have given the term a very bad smell. - J.Z., 24.5.03.)
Apply the mathematical "method of limits" to the problem: Let the whole world be one State, but San Marino still be independent. Both States will form an UNO or continue the old principle. One sees at once, that the old principle is impossible.
(J.Z.: This is as clear as mud to me. I agree only that territorial divisions as well as territorial unifications are wrongful and irrational at the same time and that this lies in their very nature. The "independence" of territorial governments does not make their citizens independent. See my two peace books on this. Something may have got lost in B.'s translation into his English. The UN never represented "united nations" but at most "united governments". And these were and are rather disunited. The very "nation" concept contains similar fallacies. A "nation" may have, at any time, one territorial government, but such a governments does not and cannot represent a single nation or a single people. Even the greatest number of political parties cannot properly represent all the shades of opinion among millions of people, who formally belong to the same State but, to a large extent do not, with their hearts and minds and their particular "fixed ideas". - J.Z., 1.3.03.)
What the World wants (Does is: Name ten people, who do! The world may need this but it does not yet want this! - J.Z., 1.3.03.) is not a Union of governments, but, on the very contrary, a Union of subjects. (Rather, unions of volunteers, who strive only for exterritorially autonomy! Then they are no longer subjects. - J.Z., 1.3.03.)
The last aim must be: To replace the old territorial subject principle by a new one: The principle of personal associations. Perhaps we can still discuss the principle, in Germany first proposed by Max Stirner. But in Germany the principle was, 1,000 years ago, well known and acknowledged in practice. Switzerland still calls herself: "Schweizerische Eidgenossenschaft", that is: "Swiss Association founded on the oath of the associated." (Panarchism, history. - J.Z.)
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On page 51, I find a speech of Mr. Bibby, Chairman of Martins Bank. There is a passage of Mr. Bibby's speech printed: "… that in inflation, which means too low production and too much credit. ..."
No, Mr. Bibby, that is, in most cases an effect of inflation (not always - - not in Germany from 1914 - 1924), but inflation is (or meant, still in 1913): Increase of fiat money beyond the limits which would be possible without the cours forcé.
It's an evil thing that the English people no longer possess a word that permits them to speak in distinct terms about the increase of forced currency beyond the limit which would be possible without cours forcé.
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Of special interest - - of course - - is for me your letter to the Editor of "The City Press" of 17. 2. 1950.
My impression is: The discussion about the gold standard would he much more fertile, if the word would be used in the sense in which Jevons or one of his great contemporaries used it. In my letter of 7. 4. 1950 I tried to define the notion "gold standard" by eight possibilities to apply it. I do hope my list was complete. If it was not, I would be thankful for a completion.
1
You and your adversaries consider only one side of the gold-standard-system. That is: the legal claim of note-bearers (and - - more important: of depositors) to claim gold-coins from the bank. That legal claim is a specific case of the general bad principle:
"Creditors are entitled to gold coins when their claims become due."
Here the reform must begin, and if there is an economist, whose opinion differs or who has not yet got his own opinion about this point (like, obviously, the "City Press"), then this point should at leant be discussed. He, who thinks it unimportant to reform the presently valid paragraphs of the civil right, which award to creditors gold coins, as long as a gold standard is preserved, should give his reasons.
In fact, the problem is still a more general one and as such already seen by W. B. Greene: It is the problem of awarding "exclusive currency" (whether merely gold, silver, or paper) to creditors. Creditors here are wage earners as well as landlords, depositors as well as railways.
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In it true, that before 1914 England was the only country in the world to maintain a gold standard? And Germany, Russia and a dozen others, whose monetary lawn were for 9/10 copies of the English?
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You state that the producing classes of England lose between L 50,000 and L 200,000 per week from a rise of 1 % in the Bank Rate.
I admit that at the present state of monetary legislation in England (and most other countries) the people loses what the Central Bank wins. But the effect of a high interest to be paid to banks is a very different one if the banks are operating on the Free Banking Principle.
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If the English laws at the time of a cold standard did not award to creditors the right to claim gold coins, the whole problem of a "drain of gold", would not have arisen. People, who really wanted gold, would have gone to South Africa, etc. (with their orders for gold - J.Z., 1.3.03.), and not to English banks.
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City Press says: We cannot maintain our basis of credit by refusing payment in gold or goods or by persisting in policies which undermine the exchange value of our currency."
City Press sees the thing through the spectacles of old and obsolete doctrines.
What would happen, if England would enact a law, stating that creditors are no longer entitled to "exclusive currency", but must be content with "local currency", yet are entitled to get such an amount of local currency, that the amount equals in value the value of the debt amount, expressed in gold (if no other basis is agreed upon) bought or sold at the bullion market?
I admit, that within the first 4 weeks, after enacting such a law, all the world (most people - J.Z.) would think: Now any business with England is impossible. But in the 5th week there would be some merchants who would speak thus:
If I import now tobacco to England, sell it here and get local currency for it, then it is for me - - because I am a merchant - - worthwhile to investigate: What is that English "local currency". I do take, of course, London as an example. And now I see, that here are circulating notes of the London Railways, the City itself, which accepts the notes, when taxes are paid to it, a great association of shops, so that every shop accepts its notes. In practice, every-body accepts this local currency and is glad when he get it. The more he gets the more happy he is. Is such a currency to be considered as worthless? Certainly not! I accept bills redeemable in local currency of London!
And the gold value of the local currency? Oh - - I learnt that in London exists a free bullion market, where everybody is permitted to demand gold and to offer the local currency or any other, and also to offer gold and to demand whatever currency he likes. I learn, too, that the whole public declines those notes, which are not au pair at the bullion market. Obviously, such notes are not worth less than the old notes of the Bank of England, which promised a redemption in gold, but saw to it, that only a small part of the public took the promise serious.
The whole change is, I see, that the redemption for those, who really want redemption, is now possible only at the bullion market. There it is possible, while before it was promised by the bank, but was only possible as long as the public did not take the promise serious.
And if I declared, that I would accept the local currency only at a discount - - oh - - it only I had no competitors, who are gladly accepting it without a discount!
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Never discussed, in England, is the problem of pricing commodities in gold. Certainly, pricing commodities, wages, etc. in gold is a very important detail of a gold standard, this word taken in the sense in which Jevons took it, Greene, Tucker and all great economists, until 1914.
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S. W. Alexander uses the word "inflation", in the edition of 28.4. just like all others do it now. For him there in no connection between the increase of fiat money and social, monetary and economic phenomena. Consequently, he does not demand: watch the issue of fiat money. That is what certain people want. (They are either as ignorant or write what their masters want them to. - J.Z., 2.3.03.)
In Germany, too, most authors, who wrote at the inflation time about monetary themes, did not write about the connection between note printing (of forced currency - J.Z., 2.3.03) and the price level, and some denied that such a connection existed. They rather held responsible - - and here most authors agreed - - that there were 3 reasons for the price rises:
1.) the Treaty of Versailles,
2.) the continuous increase of wages,
3.) the "unfavourable" balance of trade.
My contempt of university-economists dates from this time.
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I read the article "Scepticism and the Search for Certainty", in the Literary Guide of March 1950. (It deals with morals. Although everyday-life teaches, that only a proud character is able to act morally, until now, I found only one moralist who acknowledged that: Kant. ) (There ought to be a few more. It seems so self-evident: Self-respect precedes morality. You cannot respect the rights and liberties of others until you first respect them in your own person. - J.Z., 2.3.03.)
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You marked the critic: "Broadcasting and Society": Comments from a Christian standpoint, by Grisewood. Let me remark that I expect a diminution of Christendom from another side: India and China became powers. From India I expect - - as I wrote to you - - an attack on South-Africa and a complete victory of the Indians. Then Zulu and Indians will impose upon Europeans the same race-laws, which the white imposed to coloured. China will some day compel the white nations to repeal their immigration laws and then the world will daily have to do with "unbelievers" as people, equal to others. (Well, what could happen does not always happen and few succeed in predicting what will actually happen. - The last aspect is already largely realised in most cosmopolitan cities. - J.Z., 2.3.03.)
Until now the Christian world has not yet been in such a situation. The Turks, whom the Christians must also consider as equals, were no "unbelievers", insofar as they believed in "Allah", who is generally considered as the Christian-Jewish god. But 500 years after the first Chinese Joss-house was built at London, the Christians will, probably, have been reduced to a little sect, as now the Parsi, so powerful at the time of old Persia. The fact that unbelievers were, generally inferior in military strength to Christians, has contributed very much to the rule which Christendom played in the world.
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"The Malthusian is amusing. Very well, that you did not reply. It's not worthwhile. But your "slogan, used in favour of Free Banking: "conversion of wealth into capital", is excellent. In my books I described a possibility to transform unsaleable goods, in times of a crisis, into capital, that can be lent out on long terms, and that with the aid of private note-issuing. (Indirectly, not directly! - J.Z., 2.3.03.)
The Malthusian asks: " ... would Mr. M. deny that, as population increases, the supply of good agricultural areas diminishes?" - The answer is - - of course.
1.) The notion of "good agricultural area" is variable. In the Far East, not only in China, the soil became fertile by the increasing population. Experience shows that an agricultural population of 1,000 per square mile is by far not yet the limit and that, also for such seemingly congested districts, the most important problem is: How can we sell the crop?
Obviously, there exists an optimum for every country. Until now no investigations about this optimum exist. For China's soil it is proven by experience, that a population of 500 persons per square mile is better nourished than a population of 100 persons.
The erosion is diminished in the most simple, cheapest and effective way by populating the exposed districts. The people, who live in territory exposed to erosion dangers, do watch that danger much better than officials do. In Germany the soil is new much more fertile than it was in the Middle Ages. (Agriculture means caring for the land, because it pays to do so - if the product can be consumed or sold. - J.Z., 2.3.03.)
The reports from China by Pearl Buck are very inconvenient to the Malthusians. That's clear. The fact, that Chinese peasants, in general, are well nourished, the "Malthusian" tries to refuse by the report, that the average Chinese farm is little over five acres. The Malthusian should rather ask: How is it possible, that a farm of little more than 5 acres can so well nourish its owners??? Or are there errors in the statistics? (I do hope that you read Pearl Buck's article. It is very interesting. The article confirms what I learnt from German soldiers, who did service at Kiao-Chow and others, who took part in the Boxer War 1900. All reported that victuals were plentiful in the districts they saw and also very cheap. The same I learnt from civilians who lived for years in China. But all said, that the lack of transport facilities - - roads, cars, canals, etc. - - is a continuous danger, and that a district, which had a bad harvest must suffer hunger, although at a little distance cows and asses must help to eat the surplus of victuals.
----------------
If England would have followed Malthus' advice, when it was first given, then Hitler would certainly have conquered the country, or long before him: Napoleon III or Bismarck.
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I estimate the possible population of the Earth to at least 8,000 millions.
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From the "Economist" of 22. 4. I learn, that (page 914) the West Rand Consolidated Mines produced in the year 1949: 418,020 ounces of fine gold. This company paid in taxes 449,495 L, or 1.08 L per ounce. The price of an ounce is supposed to be 250 Shillings, the taxes are 14,4 % of the produced gold. Taxes must influence the
value of gold, expressed in purchasing power. I did not find investigations of the matter.
(Only to the extent that heavy taxation might reduce the annual additional output of gold. But then this additional output, compared with the already accumulated gold quantity, is relatively small and may not even keep up with the increase in the population. - J.Z., 2.3.03.)
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From page 911 I learn that the price of gold on the free market fell to 38 Dollars per ounce. That is a very remarkable and interesting fact - - I think. A year ago the price was still about 50 Dollars. On the other hand, I take, from the "City Press" of 24.2.50, the report that Chilean merchant sell gold to USA buyers for 47 dollars and from "City Press" 27.1., that gold produced by Philippine mines realises 57 dollars per ounce at the free market. Should prices really have dropped so much in a few weeks????? To what market relate the "Economist" 38 dollars per ounce?
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If I were a gold miner, I would demand, that in Germany gold may be freely owned, bought and sold. I think that before the year 1914 there was so much gold owned in Germany that, in the average, and for every family, an amount of at least one ounce of gold must be ascribed, the gold in the Reichsbank included.
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From page 903 I learn that England spent in the year 1949 an amount of L 2,465 millions for capital formation. (About 1/4 of the national income.) The amount of outstanding notes of the Bank of England was L 1,282.7 millions on 19th of April 1950. (Practically unchanged for a year. Astonishing!!)
Under a system, where capital formation is done by lending notes, to those who will form capital, probably at least 500 millions are lent out in this way. Thus in 10 years (if all loans are for at least 10 years - J.Z.), the amount of outstanding notes would be about L 5,000 millions (from this source alone - J.Z.) - - all conservatively estimated. Where is the upper limit?
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Excellent the "Economist" 's remark about the 72.5 millions invested in commercial vehicles and the 35 millions forecast by Sir Stafford Cripps' Staff. The expressed blame of Sir St. C. is amusing.
----------------
R. W. Berman says, on page 880: "Berlin is one of the trump cards in our hand for a general peace settlement to end the cold war."
The same opinion is widespread in Berlin. People say: "One day the English will sell us for some advantage in the Far East or for a good commercial treaty or simply for gold, which Russian now possesses in abundance."
----------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
Note- Issuing Private Banks and Public Banks
In Germany at the 1. Jan. 1876, when the Banking Act of 14.3.1875 came into operation.
Drawn from "Muenzgesetzgebung" of Dr. R. Koch, President of the Reichsbank, 4-th edition, Berlin, 1900.
1.) Reichsbank (at that time still a private Bank), outstanding notes
not covered by precious metal
Mark
250 000 000
2.) Ritterschaftliche Privatbank in Pommern (Stettin) 1 222 000
3.) Staedtische Bank in Breslau 1 283 000
4.) Bank des Berliner Kassenvereins 963 000
5.) Koelnische Bank 1 251 000
6.) Magdeburger Privatbank 1 173 000
7.) Danziger Privat-Aktien-Bank 1 272 000 8.) Provinzial-Aktienbank des Grossherzogsthums Posen 1 206 000
9.) Kommunalstaendische Bank fuer die preussische Oberlausitz (Goerlitz) 1 307 000 10.) Hannoversche Bank 6 000 000
11.) Landgraeflich hessische konzessionierte Landesbank 159 000
12.) Frankfurter Bank 10 000 000
13.) Bayerische Banken 32 000 000
14.) Saechsische Bank zu Dresden 16 771 000 15.) Leipziger Bank 5 348 000
16.) Leipziger Kassenverein 1 440 000
17.) Chemnitzer Stadtbank 441 000
18.) Wuerttembergische Notenbank 10 000 000
19.) Badische Bank 10 000 000
20.) Bank fuer Sueddeutschland 10 000 000
21.) Rostocker Bank 1 155 000
22.) Weimarische Bank 1 971 000 23.) Oldenburgische Landesbank 1 881 000 24.) Braunschweiger Bank 2 829 000
25.) Mitteldeutsche Kreditbank 3 187 000
26.) Privatbank zu Gotha 1 344 000
27.) Anhalt-Dessauische Landesbank 935 000
28.) Thueringische Bank (Sondershausen) 1 658 000
29.) Geraer Bank 1 651 000
30.) Niedersaechsische Bank (Bueckeburg) 594 000
31.) Luebecker Privatbank 500 000
32.) Kommerzbank in Luebeck 959 000
33.) Bremer Bank 4 500 000
385 000 000
7. 5. 50.
Bth.
(One can only wonder HOW history would have changed if these banks had been really free banks, had made full use of their monetary freedom and other institutions had been free to compete with them, not only in Germany but in the rest of the world. Our beloved legislators prevented any rightful and positive change in this direction and most of the economics "scientists" did not even enlighten themselves on this subject, far less the legislators and the general public. A very high price had to be paid for this omission - and is still being paid every day. - J.Z., 2.3.02.)
________________________________________________________________________________________
8. 5. 50.
Dear Mr. Meulen,
Adam Smith expressed the prevailing opinion when he asserted, that a lack of currency was impossible, Free Trade supposed. David Hume completed this view by pointing out that the price level accommodates to the quantity of currency, so that it would be quite unnecessary to care for a sufficient quantity of currency.
(J.Z.: This view was still held by Rothbard, as if in the meantime not hundreds of critics had arisen and hundreds of experiments to the contrary had been recorded. Primitive notions have often a much wider appeal than correct ideas and experiences. - J.Z., 2.3.03.)
Every quantity, says Hume, is sufficient, as long as prices are free to rise or to fall. Smith and Hume spoke of a metallic currency.
(J.Z.: The metallic currency, that existed for many centuries, had, nevertheless, not yet fully succeeded in replacing barter by monetary exchanges, anywhere in the world, even in the most advance economies. They could not overcome the continuing currency shortage, not even with their emergency sales prices for goods and services. Thus we have had also an experience with monetary substitutes and clearing, for centuries, but both still imperfect, because they were largely tied to fixed ideas, mainly notions on metallic redemptionism and, generally, the right of creditors to claim payment in "exclusive currency. - J.Z., 2.3.03.)
If the great economists would have been in the right, all note-issuing would have been unnecessary, as far as supply of the people with currency is concerned. And, indeed, that has been their standpoint. But both, nevertheless, were friends of note-issuing banks, it was because they esteemed them as institutions to improve the supply of credit. This point of view still prevails today and the legislation of all countries is adapted to it.
The laws of all countries and the theories of (almost - J.Z.) all economists consider the sum of outstanding notes as a debt of the issuing bank, a loan raised from the public.
Two consequences of this standpoint are possible.
The one is to decline all note-issuing banking and to say: If currency is to be considered as always existing and this in a sufficient quantity, then this principle applies also to credit. Credit banks should give credits in cash, that is, in metal, and not in notes.
The other consequence is: give up that false opinion, that currency is always available for normal business.
David Hume - - e.g. - - does not sufficiently take into consideration, that prices never vary for all commodities and services at the same time and to the same degree and that there are many money-claims quite independent from a variation of prices. Sinking prices mean for these reasons, always for employers and others, a diminishing income and a much smaller degree of diminishing expenses, so that a gap in supply with currency must occur.
Thomas Jefferson, one of the most logical thinkers, expressed this view in a letter to Gallatin, written in 1802, in his usual clearness:
"But it will asked, are we to have no banks? Are merchants and others to be deprived of the resources of short accommodations, found so convenient? I answer, let us have banks; but let them be such as are alone to be found in any country on earth, except Great Britain. There is not a bank of discount on the continent of Europe (at least there was not one when I was there), which offers anything but cash in exchange for discounted bills. No one has a natural right to the trade of a money lender, but he, who has the money to lend. Let those among us, who have a money capital, and who prefer employing it in loans rather than otherwise, set up banks, and give cash or national bills for the notes they discount. Perhaps to encourage them, a larger interest than is legal in the other cases might be allowed them, on the condition of their lending for short periods only." (Taken from: "Democracy" by Thomas Jefferson, edited by Saul K. Padover, New York and London, 1939, D. Appleton-Century Company Inc., page 118.)
Jefferson includes "National Bills" with currency. That is not consistent. He should have been an opponent of National Bills, too. He was not, and it is worthwhile to know the opinion of such a man about the circulating medium, which he called (or which was called at his time) "National Bills". In a letter to Mr. T. Cooper, written in 1814, he wrote: (The left corner was cut off. So I reconstructed the text as best as I could. - J.Z., 2.3.03.)
"We are undone ... if this banking mania be not suppressed. Aut Carthago, aut Roma delende est. The war, had it proceeded, would have upset our government, and a new one, whenever tried, will do it. And so it must be while our money, the nerve of war, is much or little, real or imaginary, as our bitterest enemies choose to make it. Put down the banks, and if this country could not be carried through the longest war, against her most powerful enemy, without ever knowing the want of a dollar, without dependence on the traitorous classes of her citizens, without bearing upon the resources of the people, or loading the public with an infinite burthen of debt, I know nothing of my countrymen. Not by a novel project, not by any charlatanerie, but by ordinary and (also? - J.Z.) experienced means; by the total prohibition of all private (notes? - J.Z.) at all times, by reasonable taxes in war, aided by the necessary emissions of public money in circulating size, this bottomed on normal taxes, redeemable annually as this special tax comes in." (Pages 119/120.)
Jefferson spoke of redeeming the "public paper" by money which came in by the special taxes. He did not mention the ability (inability? - J.Z.) to pay the special taxes for the public paper, so that (… st) (most will- J.Z.) no be redeemed. But I think that he included this possibility, (… ar) (with war? - J.Z.) at hand, without mentioning it.
The inconsistency of Jefferson here is, that he would not grant to privateers the privilege he was ready to grant to government, that (it may? - J.Z.) issue paper of circulation size, on the basis of payments due (…. e) (at the? - J.Z) time of issue (not in future). (Precisely, allowing them to issue paper money upon taxes due only in the future, is the wrong thing. But here I have not even B.'s full text on hand, for the left side is partly cut off - J.Z.)
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On the certificates, sent by Swiss citizens to their friends in Germany, and for which they may exchange goods at the Central Warehouse for Swiss Care Goods, is printed, in three languages:
1.) Warengutschein,
2.) Bon pour marchandises,
3.) Voucher for goods.
So it seems, that the best translation for the German "Gutschein" is voucher, and not, as the Toussaint-Langescheidt Pocket-Dictionary (the best for modern English) proposes: "Credit- (note?-J.Z.).
(Goods warrant might be better until a still better term is found. - J.Z.)
If that were true, I would say:
The certificates in my note-system are vouchers. The goods, for which they are exchangeable, are ready at hand.
The notes in your system are interest-free mortgage bonds or interest-free bills of exchange or interest-free promissory notes. In (this? - J.Z.) case they contain the element "credit", which vouchers do not contain, although they contain the two elements "obligation" and ("debt"? "credit"?- J.Z.), or "claim".)
The public paper, based on due taxes and whose issued amount does not surpass the amount of the due taxes, does not contain the element "credit". Its economical nature is that of a voucher, not that of an interest-free promissory note. Jefferson saw that and there he was ready to admit it. Nevertheless, it was an inconsistency of a man who seriously believed, that metal currency can never lack.
That public paper, based on due taxes, does not contain the element "credit" and, therefore, is no credit note, was acknowledged by the eminent economists: Steuart (the first, I think), Adam Smith, Roscher and some Prussian economists, not known abroad but all named by Roscher. They all did not draw the right conclusions from their observations and did not apply the principle, (good? valid? - J.Z.) in public economy, to the private sphere. They should have (remarked? - J.Z.) at least that there may exist beside the "credit-principle" a "voucher-principle" for the issue of private notes.
---------------
You know that I am no friend of financing credit simply by lending notes to debtors and to discard those as creditors, who possess goods or are ready to render services and are ready, too, to delay their claim to an equivalent.
No trust in the banker will (…..t) (arrest? replace?- J..Z.) the dependence of new loans, granted in this form, from the (debts? - J.Z.) of previous loans, not yet repaid. Trust and this kind of (confid ? - J.Z.)ence are two economic elements which have nothing in common. (…..e) (One? - J.Z.) cannot replace the other.
I demand a system of issuing notes and of financing credits, which (is for? - J.Z.) new loans quite independent of former loans not yet repaid.
(J.Z.: Here, finally, ends the photocopy sheet with the text cut off on the left side. I was never good at cross-word puzzles or got pleasure out of them. - The Antiquarian Mr. Eckard Duewal, in Berlin Charlottenburg, has the original letter duplicates but guards them and the other written and printed inheritance from B. like a dragon, hoping, that some time in the future, when he is no longer too busy as a second-hand book-dealer, he may be able to deal effectively with this material. But at least he allowed me to photocopy this correspondence and, unavoidably, I did make some mistakes during my prolonged copying effort of uncounted thousands of pages. I also plead guilty of having left this material unused for the last 12 years. I hope that E. D. will not delay much longer accessing this and other material for his own purposes and that he will also make much of it accessible to others, in one form or the other, before he, too, gets old and decrepit. Sometimes one can love treasures to their or one's own death, without doing much with them or for them. - I shudder at the thought that soon I will be 70, i.e., as old as B. was when I met him for the first time, back in 1952, when I was 19. Now one of my granddaughters is already 17 and drives her first car. - J.Z., 2.3.03.)
On the other hand, I admit - - of course - - that credits to finance the production and the consuming of articles made in bulk, or to be used or consumed by many, require note issue. Avoiding the dependence of new loans from former credits requires a special technique, which is here quite essential. I wrote about that technique in former letters.
(J.Z.: Essentially, you will have to subscribe with earned goods warrants etc., just as with earned legal tender, to medium or long-term securities or fixed deposits, etc. and the lenders will have to repay the loans with earned goods warrants. For each occasion, the subscription obligation of the real creditor and the repayment obligation of the debtor, the bank can issue goods warrants to that extent, to make the loan subscription, as well as the loan repayment easier, as far as the supply of exchange media for these actions is concerned. In the first case, the newly issued goods warrants will stream back from the subscriber to the loan [if he does not merely subscribe with a goods warrant account credit he has already at the bank, then he is under a corresponding acceptance obligation for the goods warrants of the issuing bank], while the later and properly timed issue or issues for instalment repayments, stream back, when the debtor repays the loan. The present balance for goods offered for notes and notes issued redeemable in goods, must always be kept, even for such transactions extending over a long time. Thus at least two issue and reflux actions are required. In the primitive and unsound "asset-currency" or "loan from the public" note issue cases, there is only one long-term issue, with most of the additional notes remaining for a long time in circulation, seeing that they must stream back only to the extent that the debtor repays in instalments, or pays interest or when he finally repays the remaining debt in a lump sum. In the meantime, all the other notes issues for this purpose do have NO reflux, no one obliged to accept them at par, and, therefore, they will, under competition from sound notes, depreciate. - Generally, the sound notes will drive such "asset currency" notes out of circulation. They are also a kind of fiat money, but one without the legal and wrongful power of forced value and forced acceptance. The sound notes issues for long-term credit purposes, represent not really a special technique but simply one of common sense and honesty. Any deviation from this method (balancing issues with reflux at any time), and its result, can be easily foreseen, like a false chess move. Alas, most people tend to ponder chess moves more often and more thoroughly than they ponder questions of issues and reflux of notes etc. - J.Z., 2.3.03.)
I know your objection: "In old times no special technique was applied and, nevertheless, bankers gave credits in notes without caring about previous loans.
Let me remind you:
1.) In old times the quantity of precious metals possessed by a banker limited his issues. That was also true for bankers using the option clause. (Or those using a fractional cover. - J.Z., 2.3.03.) That clause prevented for the banker unnecessary drains; but it did not free him from the necessity to sooner or later possess the precious metal wanted and promised and he had to limit his loans to some multiple of his store of metal.
(There were also, in old times, people who observed, quite justly, that bricks in the vaults of the bankers would
do the same service as gold or silver under such conditions.)
(J.Z.: Most of the time. Especially when the bankers were clever enough to assure another and sound reflux of their notes, i.e., by merely issuing them in the discount of sound commercial bills (real bills) or other and quite equivalent short term claims, assuring a regular, rapid and certain reflux of their notes. - J.Z., 2.3.03.)
The issue was, therefore, always far below the amount which the country's economy really wanted, and, therefore, interest-free promissory notes get an additional value nearly equal to the missing interest, so that the notes circulated at par.
2.) The large denominations of the notes (one pound being the smallest - - I read - -) prevented them from entering into the economic sphere of shops, of wages and (in practice) of more than 1/2 of the people.
Today, when clearing performs the payments in the sphere of the former note-user much more perfectly than notes can do, and when financing wages and shop traffic will be the most important business of future note-issuing institutes, principles very different from the old habits must be applied.
The old "" redemption on demand" principle enabled, on the other hand, a greater liberality in long-term credits. If this principle (which you call "gold standard principle") is discarded, the old liberality is no longer economically possible.
-----------------
The general opinion of businessmen is not always true, especially in the theory of note issues. Let me remind you, that in Spain the minister of finance lets the newly printed notes be blessed by high officials of the Roman Catholic Church, to prevent them from getting a discount and that the notes were also printed from silver plates, to improve the relations of paper to silver. Businessmen and (probably) the whole people believed that to be a good method. (In Spain.)
(J.Z.: A funny part of "Christian" "culture". Like the blessing of newly built bridges. As if there were statistics that proved that "blessed" bridges had less car accidents and did not collapse altogether as frequently as the un-blessed ones. - I believe that it was somewhere in Roscher's writings that I read about another Spanish absurdity: At least somewhere in Spain the spectacle-makers complained, that they did not sell enough spectacles. So the government "protected" them by legally forcing everybody to buy and wear spectacles, even if they had to knock out the lenses or replace them by plain glass, in order to be able to see. I do not know for how long this absurdity was enforced, but do know, that absurdities and wrongs like price and wage controls persisted over 4,000 years and that monetary despotism and governmental decision-making on war and peace and the postal monopoly and XYZ still persist into our days. - J.Z., 2.3.03.)
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I include a clipping from the "Tagesspiegel" concerning the supply of eggs by German producers. They promised to supply the people, if only foreign competition were discarded and demanded a protective duty. That was (of course) granted. The name was avoided, because the people begin to conceive that the people are not protected by protective duties. They call it now: "Import-Ausgleichs-Abgabe". (Import balancing tax. - J.Z.) The "Tagesspiegel" reports, that the supply was not improved by the Import-Ausgleichs-Abgabe, although the prices of eggs rose
considerably - - I think by at least 1/5th in the average. Effect: Nobody bought the dear eggs. Since yesterday the prices begin to sink.
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I hope to write some lines in one of my next letters about the very interesting article in the "Sunday Graphic" of March 19: "Is a third world war inevitable?"
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
13.5.1950.
Dear Mr. Meulen,
I sent to you by printed matter a clipping from the "Telegraf" of 4.5.50.
The information is about the prescriptions for businessmen in the Easter Zone,
1.) to pay-in, daily, by 12 o'clock, their receipts to a bank,
2.) to pay bills of more than 100 East-mark exclusively without the use of ready money, that is, exclusively by banks or the post office,
3.) to withdraw from the banks or the post office account no more than the amounts for wages and 300 East-marks a month for personal purposes,
induced me to complete my list of monetary liberties. I found it necessary to append a 9th:
"The liberty to establish money accounts with any person, institution or bank ad libitum and to dispose of these accounts freely, according to the agreed-upon conditions."
------------------
You see from the clipping, that in April 5,600 refugees begged to be admitted to the Western Zones, from the camp of Uelzen-Bohldamm alone, and that 4,663 were sent back. By such a cruelty the authorities of the Western Zones prove, that they are not better than those in the East. The officials here guilty deserve to be sent themselves to the Eastern Zone, and to endure there what the sent-back refugees must endure - - tortures in the concentration camps and such things. Uelzen is situated in the British Zone. Is there no member of the English parliament, who will protest against such an administration or the laws that permit it?
Free Banking would enable the Western Zones to welcome every refugee able to work as a helper. But that the authorities do not know this simple method does not excuse them. I doubt also, that such a behaviour corresponds to the mentality of the people.
Some months ago I assisted an assembly of the Social Democratic Party. The problem of the fugitives was discussed and very timely it was, because then, in Berlin, about 100 refugees arrived daily. Just one man protested about the burden on the labour market by the arrival of the fugitives. But the lecturer said, that here such considerations were not at the right place. Refugees must be helped, quite independent of the situation at the labour market. There was no protest against this statement in this assembly.
--------------
The little list of wages in Berlin will interest you. (Apparently, B. did not keep a copy of it, so I could not photocopy it. - J.Z.)
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The "Bruecke" of 11.5.50, reproduces a Malthusian proposition on page 16. But the same issue of the "Bruecke" translates an excellent article by Ritchie Calder: "Hannibal and his Elephants". Here is can be read, how districts, in antiquity populated by hundreds of millions, are now deserts. (Hundreds or dozens? - J.Z.) Calder explains, too, how erosion is the natural affect of depopulation by wars or bad administration. I studied, some years ago, the question of soil erosion in Persia. (I usually replaced his term "corrosion" by "erosion". But it is possible, that at least sometimes he meant, instead, e.g. "salination". It's too late to ask him now what he meant. - J.Z., 2.3.03.)
I am now convinced, that it would be easy to increase Persia's population by at least 50 million men (say, by immigration from India) and that, simply by the presence of these 50 millions the deserts would become, what a great part of them still was at the time of Abbas: a soil surpassed by very few in fertility. Moreover, the Persians know very well the art of transforming a desert into fertile land. They use it, where, exceptionally, a governor really governs instead of plundering his subjects. The effect is always surprising.
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The "Monat" recommends reading James Burnham's "The Coming Defeat of Communism", John Day, New York. From the extracts given by the "Monat" (Month - J.Z.), I see, that the book really is extraordinary and that one must have read it.
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
19. 5. 1950. Your letter of 16.5., received today.
Dear Mr. Meulen,
it must have been about at the same time when you learnt Esperanto, that I learnt it too. Like you, I think that Esperanto is one of the most useful inventions ever made. I regret that, after Esperanto had been invented, so many etymologists wasted their time to become competitors of Dr. Zamenhof and so frittered away the power of an international language idea. It may be that Zamenhof's epigoni introduced some improvements. But, as the German saying states: "Das Bessere ist der Feind des Guten." (The better is the enemy of the good. - J.Z.) In Russia - - I read - - Esperanto is prohibited. I think that's one of the best arguments pro Esperanto. In Berlin there is a little group of Esperantists, all men of very little leisure, many unemployed, many old, so that the group's activity cannot be great. I regret that I have 100 % forgotten my Esperanto.
----------------
Limit of a cash reserve for bankers. Maybe that the legal prescriptions are objectionable. But the banker himself must have clear ideas on that point. If he thinks that a cash reserve is necessary (an opinion I do not share), his standpoint cannot simply be: I think a cash reserve is necessary, but I refuse to get clear ideas to what degree such a reserve is necessary.
-----------------
UNO. In general I do agree. But cases, where other groups than governments do have the power to begin wars must be taken into consideration. That subordinate generals began a war, without asking their government, has, sometimes, been observed. (The Chinese-Japanese war about 15 years ago was begun by the commander of the 19th Chinese army.) A case like the raid of Dr. Jameson (1895) may be repeated. John Brown, who began a civil war in 1856, even deserves sympathy - - I think - - and I regret, that the Anglo-Saxon race was destitute of such men in the years of 1947/1948. when there was still time to use the atom-bomb-monopoly against the Kremlin, a monopoly now broken.
(J.Z.: Here I strongly disagree with B. - and he did not uphold this opinion later, but rather approved an approach like that outlined in my first peace book, in PP 61-63, also largely based on his own ideas. (Now online at www.panarchism.info/ - B. died before I published my second peace book, dealing mainly with the nuclear threat. It's also available there. There is a strong case for unilateral nuclear disarmament - and its moral position can be greatly strengthened by numerous other rightful and rational steps, which ought to accompany it or even precede it, as is likely to happen in a natural development. Most of them have been outlined in my 2 books on the subject. - J.Z., 2.3.03.)
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Gold standard considered as a fixed relation between paper and gold.
Jevons reports a curious thing concerning the obligation of the mint to buy gold. The option of Jevons was, that such an obligation did not exist and, on the other hand, no obligation of the public existed to accept notes from the mint for gold handed over to the mint. Jevons knew the laws well and was an assayer of the Australian mint, too. Jevons possessed a quantity of Australian gold and demanded from the mint that it coin that quantity. He declined notes and coins made from other gold than that which he had brought. The manager of the mint told him, that for decades it was the first case that a citizen insisted upon such a demand, but at last he ceded to it, because he knew the law, too. Jevons - - of course - - had no intention to vex the mint but he wanted to clear up the legal situation.
In Germany the mint was obliged to exchange gold bars for gold coins, but was not obliged to exchange gold bars for notes. He, who wanted notes, was sent to the Reichsbank. The mint sold - - without being obliged to do so - -
gold coins to the gold industry, before they were stamped. These plates were of much use to the industry, their weight being very exactly fixed and the fineness, too. Before the mint introduced that kind of trade, the industry melted down freshly coined gold coins, which was not considered as desirable from an economic point of view.
As far as I know, the legislation in most States was similar to the German, which - - at its time - - was considered as the best. (It seems that Michaelis, an excellent expert, was responsible for it.)
The obligation of Central Banks to buy offered gold for notes or coins, as the deliverer choose, existed for all Central Banks in the world. (Sven Helander, The System of Central Banking.)
An obligation, to redeem on demand notes at their face value into gold, existed for the Reichsbank, from its establishment until 1914, but only within the limits of the par. 18 of the law of 14. III. 1875, so that your statement is true. This par. 18 said:
"The Reichsbank is obliged to redeem its notes to bearers for German money, fit for circulation,
a.) at the main office on demand and without delay,
b.) at the branch offices insofar as their cash and their to be expected requirements permit it."
(Par. 18. Die Reichsbank ist verpflichtet, ihre Noten:
a.) bei ihrer Hauptkasse in Berlin sofort auf Praesentation,
b.) bei ihren Zweiganstalten, soweit es deren Barbestaende und Geldbeduerfnisse gestatten,
dem Inhaber gegen kursfaehiges deutsches Geld einzuloesen.)
The commentary by Koch, Presdent of the Reichsbank, adds: Without this limitation the export of gold would be facilitated. (Ohne diese Beschraenkung wuerde die Goldausfuhr erleichtert werden. Vgl. Stenographissche Berichte des Reichstags von 1874/1875, Seite 1332 ff.)
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Objections raised in Germany against private note-issuing banks.
The main objection was: Notes are loans of the banks, granted by the note bearers. But nobody, also not banks, has the right to take loans from persons who are not willing to grant the loans.
The adherents of Free Banking tried to refute this objection by this argument: The notes of Germany are not endowed with cours forcé (Zwangskurs). Everybody has the right to decline the notes.
The adversaries said: In practice such a right is never used. Everybody is glad to get a payment. Experience teaches, that even prohibited notes are accepted. (In Prussia other than Prussian notes were prohibited.) But the fact that everybody accepts the notes does not remove the other fact that the banks raise interest-free loans from the public. Such a privilege can only be granted to the State or to State banks.
To the argument, that the notes were redeemable on demand, the adversaries replied: For that part, which exceeds the cash in the bank, the notes are not redeemable. That is not very important in the case of a State bank, as the experience in England has proven. Several times the Bank of England was released from the obligation to redeem its notes, but that caused no distrust against the bank. But if in Germany only one private bank would not be able to redeem its notes, then that could produce a catastrophe.
There were two reasons for the resistance by the note-issuing banks to diminish more and more, so that it was easy for the Reichsbank to successively buy the privileges of the existing banks.
The law permitted the Reichsbank to increase its own issue for the amount that the bought private bank was permitted to issue, or - - more exactly spoken - - to increase the tax-free issues of the Reichsbank. The Reichsbank was permitted to issue ad libitum the amounts that it thought to be necessary, but if the issue surpassed a certain limit, then the extra amount was taxed with 5 % per annum.
That kind of tax ("Notensteuer") was an invention of Michaelis and was much admired at his time. The general opinion was: By the note-tax the Reichsbank is able to supply the business community with any amount really wanted, so that nearly the advantages of Free Banking are obtained. On the other hand, the par. 18 protects the Reichsbank to a certain degree against gold speculations and gold exportations.
(The most important detail of the Bank legislation was seldom discussed: that for decades the smallest amount of a
note, private note or Reichsbank note was 100 marks.)
Now the German Note situation is - - so they said - - as good as it can be.
The two reasons why private note-issuing banks did not resist the tendency of the Reichsbank, to buy all private note-issuing banks, wore:
1.) The profit from note issuing was very small. Competition had lowered the discount to 2 %, if the loans were granted in the bank's own notes. (The Prussian State Bank took 4 %, that of Frankfurt on the Main, too, probably also the other State Banks.)
2. The danger, that the Prussian State Bank would suddenly present a very large amount for redemption was always great.
The discounting department of the great State Banks and, especially, of the Prussian State Bank, were excellently managed and - - in Prussia - - every little businessman could there discount his bills without difficulty. The Prussian Bank was - so I read - - more liberal than the other note-issuing banks, so that the public more and more preferred that bank. (Apparently, the double interest rate did not outweigh that advantage! - J.Z., 3.3.03.)
Even in Southern Germany the Prussian Bank had many customers who were considered, by the banks of their own district as "unsafe", because they had no collateral securities to offer. (As if "real bills" were not security enough. In other words, they did not understand their own business! - J.Z., 3.3.03.)
At the great crisis of 1857 (when Marx expected the social revolution) the Prussian Bank continued to discount, while at Hamburg - - which had no note-issuing bank - - it was considered as "unsound" by the "experts - - the interest at the Exchange rose to 1 % daily, and no bill could be discounted.
The Prussian Bank was the pioneer of the Prussian politics in South and Middle Germany. Many businessmen said: There are many objections against Prussia, but people like us can get money from there, while our own government does nothing else in money politics than to demand money from us.
After the war of 1866 and in the occupied territories, the considerably improved liquidity, through the help of the Prussian Bank, was appreciated and helped to let the old State become quickly forgotten.
If the law would have permitted notes of less than 100 marks, there would have been a wide field for private issuing banks - in supplying employers with means of payment for wages. But even theorists (in general) argued against small notes and believed Adam Smith and all the other great economists, who asserted: Small notes drive out metal from circulation.
(If rare metal coins really would have thus been "driven" out from circulation, then, as real economists, they should have welcomed the economising of rare and expensive metals for this purpose. Now everybody knows that for most purposes cheap metals or paper do just as well, if not better, for this purpose. So, in this respect, these famous economists were not so great. - J.Z., 3.3.03.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Greene's notes. If the word value would not be taken in the sense in which Greene used it, that is, in the sense of purchasing power and in no other sense, your objection would be right. Replace, in the two quoted passages, in your letter, the world "value" by the worlds "purchasing power" and all is clear.
The words "purchasing power" were - - it seems - - not yet in use at the time of Greene. The corresponding German word "Kaufkraft" I found in literature in common use since about 1850, in a few cases a little earlier. In Fluegel's Dictionary, edition of 1861, it is not yet contained. Even Thieme-Preussen of 1903 contains neither "Kaufkraft" nor "purchasing power". Also in Nuttal's "Standard Dictionary" of 1887, and Webster of 1880, "purchasing power" is not mentioned.
Greene, at page 56, line 13, says: "… money … has … one value as an article that can be exchanged for other commodities … " and means, obviously, "purchasing power" and certainly would have used this term if the expression would have been in common use at his time.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
26. 5.1950.
Dear Mr. Meulen,
the day before yesterday I received:
1.) "The Economist" of 29. 4. 50.,
2.) "The Malthusian" of April 1950.,
3.) "City Press" of 5. V. 1950.,
4.) "The Free Trader" No. 253 (March-April), two copies,
5.) "National News-Letter", Nos. 712, 713, 719.
I thank you very much!
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In the "Economist" I read that the Egyptian Pound is worth too much in the eyes of Egyptian exporters. The Egyptian Government tries many things to devaluate it, so that exporters are content. It they world not be too stupid, they would introduce Free Banking and a free market for foreign exchange. Then, in a few days, they would get the quotation wanted, if honesty should play a role. It they should think honesty to be a disturbing element (and it seems, that they do think that), then they might also cancel the law which prohibits forged money. It would prove an excellent means.
The article "Capital and Savings" offers - - I think - - the possibility to estimate the quantity of notes to be issued annually, if investment would be financed by note-issuing. The quantity will be smaller than L 2 1/2 milliards (page 955), but much smaller?????? Now the quantity of issued and circulating notes is about 1280 million Pounds.
In the article "Indians in South Africa" the author remarks very well, that the, Indian birth rate is a threat for European. It is really so, and only by abjuring Malthusianism in all forms could the white race meet this threat. If they do the contrary and follow the "Malthusian", they will be swept away by an Indian army twenty times larger than the whole white population in South Africa. (The experience of two world wars taught, that Indian soldiers know how to fight.)
You read - - I hope - - the article "Re-education in China". The effects are not to be overestimated. In Japan they had, still in 1945, exactly that social organisation which Orwell described so excellently in his "l984": The "thought -police" existed, with torture and all that belongs to such a government, and the "televisors" were replaced by a system of spies perhaps only possible in Asia. And all that disappeared, like snow in hot sunshine, when the Americans occupied the country. The present mental revolution in Japan is, perhaps - - I think - - one of the greatest that ever occurred in the history of a people. But nobody realises that, by the continuance of the centralised money administration, the conditions are provided, to restore the old excess statism, the latter being nothing but the last consequence of monetary centralism. There is only as much freedom for a people as there is freedom among them to procure standardised means of payments - - a doctrine quite overlooked by sociologists, Herbert Spencer included.
(J.Z.: At least Herbert Spencer was a Free Banking advocate, explicitly, not only through the "right to ignore the State", which he advocated in his youth. - The two world wars were fought under monetary despotism. Japanese authoritarianism, Communist Chinese, Soviet and Nazi totalitarianism arose under monetary despotism and it also facilitates the present tendency towards World War III. - J.Z., 3.3.03.)
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"The Malthusian" is logically killed by the article - - meanwhile becoming celebrated - - of Pearl Buck. Malthusians now resemble the souls of dead men, of which Swedenborg reports: They hardly could perceive, that they would be dead, then they still existed and their feeling was not very different from the feeling before they died.
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"The Malthusian" quotes a passage from Adam Smith. The facts reported by Adam Smith were true and for a very great part of the population still are true. What Adam Smith did not report, simply because he was never in China, but certainly would have underlined, if he had resided there, was: Side by side, where the poor Chinese drowned his new-born child, because he could not buy victuals for it, th fisherman throws his unsold fish into the river. The one said: Too many eaters in China, the other said: Heaven, send more eaters, to relieve the plight of us fishermen.
"The Malhusian" quotes a statistic (who drew it up?? Professor Tawney himself ??) which teaches that 36 % of Chinese farms contained less than 1,5 acres, 6 % contained 15 acres and more.
We know that from Germany and Italy. The peasants with dwarf-farms went to the "large" farmers and worked there. Or will anyone pretend that it is possible in China to cultivate a farm of 15 acres by one family???
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I hope to write still some words about the article "Do We Fear Competition?" in "City Press".
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"Free Trader", No. 253. I read again with the greatest pleasure the extract from the speech of Princess Margaret. If only this lady, already one of the best heads of England and a noble heart, could be brought to read something about Free Banking.
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A friend of mine in Switzerland visited Paris, some weeks ago. He reports that housing shortage in Paris surpasses all what one can believe. He asked his friends - - all well-trained insurance men, what may be the reason that nobody now builds new houses or repairs the old ones.
Answer: That must be a funny man, who invests money on a franc-basis after so many devaluations and the consequent price increases. And, nevertheless: Nobody demands a stable currency, all still cry for price and rent control, although the government itself now sees that price etc. control is beyond its powers and a free market is the best solution or the least evil.
(This might have to start with a free market in educational services. For who produced the present ignorance and prejudice among pupils and teachers, students and professors - in the first place, with a prescribed curriculum and selected text books and subsidies for flawed teachings? - Libertarians have not yet provided an alternative education avenue, through all their writings, made available on very affordable alternative media, and, e.g., through the new World Library being built up in Alexandria, Egypt. Make all your texts available there, online, without copyrights restrictions. You will not earn money thereby, but, maybe, freedom, sooner than otherwise. - J.Z., 3.3.03.)
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I hope to write more next week.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
(Bth.) Essay of a translation (Attempt at a translation, here, as usual, with my attempt to approve it. - J.Z.)
Mr. Robert Picard, Actuary, 6.5.1950.
Troinex / Genève,
Chemin du Ruisseau.
Dear Mr. Picard,
If I lived in Switzerland, I would try to influence, by articles or in another way suitable, the Swiss legislation to come into operation in the case of a war. I would propose to complete it by paragraphs like the following:
1.) Switzerland acknowledges, as a part of international law, the principle that aggressive wars are to be considered as murderous assaults by the governments which began the war or prepared it.
2.) In the case of a war Switzerland is not at war with the population subdued by the hostile government but with that government only.
3.) Switzerland does not consider or treat as prisoners of war any people of the hostile army, who report themselves at Swiss authorities or troops and declare, that they have been forced to serve in the hostile army but recognise that the war of that army is unlawful. As the case may be, they are then treated as subjects of an allied power or as neutral foreigners.
4.) The said persons (No. 3) are entitled to claim from Switzerland at least those rights which the Hague Conventions on Wars grant to prisoners of war, concerning treatment, maintenance and lodging.
The additional rights granted to said persons by Switzerland will then be made known as soon as possible and, if circumstances permit, at their first report.
5.) Persons mentioned under No. 3 have the right to choose their residence, may it be in Switzerland or in another country. If they choose the latter, Switzerland will send after them, as far as this is possible victuals or pay, to secure to them an income with which they can purchase, in the other countries, what they are entitled to under the Hague Conventions as prisoners of war.
Should Switzerland enacts special laws for the residence of foreigners in Switzerland, then these apply to the persons named under section 3.
6.) Persons mentioned under No. 3 are entitled to get a compensation for war material brought by them to Swiss authorities or troops. Switzerland will, as a rule, pay such war material the same price that Switzerland would pay for similar war material to Swiss manufacturers or merchants. For canons, machine guns, flame-throwers, armoured cars, wagons, bicycles, life stock, aeroplanes and ammunition of every kind, if in good condition, double this price will be paid.
7.) Persons mentioned under No. 3, who did not consider themselves as hostile soldiers, although they were compelled to join the hostile army, but, nevertheless, acted so as Swiss soldiers would have acted in their place, may claim the same rewards and honours as Swiss soldiers. In every case, these persons may rightfully claim rewards and honours for the destruction of hostile war material, for propaganda for the world's peace, for deposing the hostile government and for joining the revolutionary government supported by Switzerland.
8.) Switzerland considers itself as allied with that part of the population subdued by the hostile government, which is ready to make a separate peace under the conditions proposed by Switzerland.
Switzerland will acknowledge a provisional government of that part of the population, will assist it and will consider it as her ally, if that government agrees.
Emigrants, who declare themselves adherents of this provisional government and sign their declaration at a Swiss authority or troop, are considered as subject of a government allied with Switzerland.
The same applies to persons mentioned under 3.
9.) Switzerland conquests and also reparations from those, who were forced to participate in the war.
(J.Z.: In his translation of the 3 lines of the German original, B. was more elaborate: "Switzerland renounces the incorporation of territories won by military operations. Switzerland renounces, too, reparations from persons who did not voluntarily partake in the war on the enemy's side or remained subject to the hostile government, although a possibility existed to give up that citizenship. - Again, slightly "improved" by me in its translation. - J.Z., 3.3.03.)
10.) After the war Switzerland will not meddle with the affairs of the country before subjected to the vanquished government, but Switzerland will not tolerate a constitution of the country or an organization by which a group or a dictator will get the chance to renew the war or to prepare for a new war.
11.) Switzerland will call to account, after the war, and if possible then during the war, all persons who caused the war, instigated the population or committed crimes forbidden by the Hague War Laws. They will be judged according to international law.
12.) Swiss Authorities accept at every time, in peace and war, declarations of foreigners, that they will not partake in a war against Switzerland and that, if they are compelled to do service in an army hostile to Switzerland, they would consider such a restraint as unlawful as far as Switzerland or her allies are concerned.
13.) Switzerland imposes upon every Swiss citizen the duty to assist the Swiss government in maintaining peace and further, to explain to foreigners at every opportunity the peace program of Switzerland.
Swiss citizens shall not associate with persons instigating the population into wars.
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Considering, that for decades and also in peace times, numerous persons fled to Switzerland, who were under threat of conscription, or who were already conscripted into an army (from Germany alone every day recruits crossed the Swiss border), the possibility should be created to treat such persons in a, way that corresponds to Swiss pacifism.
Until now such persons were considered as highly undesirable for all Swiss citizens, because (seemingly or really) they were a burden on the Swiss labour market. Swiss citizens will not accept these persons kindly before it becomes certain, that each refugee can find work in Switzerland without depriving any Swiss citizen of work.
To establish institutions for this purpose is not only possible but easy.
It can be achieved that every fresh labour offering itself to Switzerland will be no less welcome than a newly discovered waterfall or a newly build wind power plant.
In one of my next letters I will try to say something more about this.
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
(J.Z.: Since the above is still a flawed translation and the subject is important and acute again, seeing the current USA government preparation for a war against Iraq instead of a tyrannicide action against its dictator, I do append here the German original from those letters of B. to Dr. Picard that are in my possession. For the general idea itself of this program, I refer to the Beckerath letter extract that has been included in my two peace books, in some more details than in this short letter, which was part of the letters sent to Meulen. In each version of this plan that I have seen, there are some details that are omitted in others. Perhaps one day I will get around to pull all these different versions together or even fill a book with all the references that I have so far collection for this plan under the heading "desertion". In his translation B. also added some details to the original.
A kind of military jiu jitsu [The term "Judo" is better known & it employs largely the same technique. - J.Z., 24.5.03.] is involved, which turns most of a despotic enemy regime's strength, its military forces against it. Any really free societies or somewhat free States do have to offer to the subjects of a dictatorial regime, including its soldiers and officers, much more than that regime has to offer them. If that is clearly, convincingly, honestly, publicly and in a trustworthy way offered to these victims of a dictatorship, then they will either turn away from it, associating themselves with us or becoming neutral, or rise against it, because their government is then clearly their primary enemy and peace, freedom, justice and prosperity can only be reached by them if they turn against it. The practical details are all important and they must be made known to every subject, soldier and officer of a dictatorial regime long before that regime tries to begin an aggressive war. They are also captive people and really our secret friends and allies, to a very large extent, if only we do consider and treat them as such. Then an attempt of that dictatorship over new victims will become its death warrant. Full monetary freedom and fully free trade and other economic liberties are also necessities for this libertarian defence, revolution and liberation attempt.
Some will realize, that the above "translation" is still flawed and will, I hope, provide a better one. The old slogan of the time of the French Revolution: "Peace to the huts but war to the palaces" ought to become optimally developed and detailed, so that mix-ups like the currently prepared "war against Iraq", instead of "removal or destruction of its tyrannical regime, preparing to threaten other countries, too, with mass murder devices", will no longer happen. We should let friends, neutrals, allies and real enemies let themselves sort out and separate, thus reducing "wars" to mere police actions against criminals, with the help of all their victims. Quite just war and peace aims, that could prevent wars and lead to just and free societies, are still not declared and published by either side, not even by libertarians.
For perfectionists, working towards a better translation, I should and might provide a photocopy or a scan or, if I can, an electronic image of B.'s own rough attempt at a translation. Here and now I haven't got the energy for this but merely amended my own somewhat corrected copy. But can one launch such an idea among people still believing in mere marches, protests etc.? There are still so many flaws among most of the present "peaceniks" or "peace lovers" as well as among the "war-hawks" and among the "moderates" and "neutrals". Each of them is right on a few points and wrong on so many others. - J.Z., 3.3.03.)
____________________________________________________________________________________________
U. v. Beckerath, … 6.5.1950.
Lieber Herr Dr. Picard,
wenn ich in der Schweiz lebte, so wuerde ich versuchen, auf die Schweizerische Kriegsgesetzgebung einzuwirken und wuerde folgende Ergaenzungen vorschlagen:
1.) Die Schweiz erkennt den voelkerrechtlichen Grundsatz an, dass Angriffskriege fuer die Regierungen, die sie betreiben, als Mord und Anstiftung zum Mord anzusehen sind.
2.) Im Kriegsfalle betrachtet sich die Schweiz nur als mit der feindlichen Regierung im Kriege befindlich, nicht aber mit der von ihr beherrschten Bevoelkerung.
3.) Angehoerige der feindlichen Streitmacht, die sich bei Schweizerischen Dienststellen melden und dort erklaeren, dass sie zum Dienst bei der feindlichen Streitmacht gezwungen wurden, oder dass sie die Unrechtmaessigkeit des Angriffskrieges gegen die Schweiz erkannt haetten, werden nicht als Kriegsgefangene betrachtet. Je nach ihrem Verhalten gelten sie entweder als neutrale Auslaender oder als Staatsangehoerige einer verbuendeten Macht.
4.) In bezug auf die Verpflegung, Unterbringung und Behandlung stehen den unter 3.) bezeichneten Personen wenigstens diejenigen Rechte zu, welche die Haager Landkriegsordnung den Kriegsgefangenen zubilligt. Die von der Schweiz eingeraeumten, darueber hinausgehenden Rechte werden ihnen baldmoeglichst bekannt gegeben, moeglichst schon bei der ersten Meldung.
5.) Die unter 3.) bezeichneten Personen koennen ihren Aufenthalt beliebig waehlen, auch ausserhalb der Schweiz. Im letzteren Falle wird ihnen die Schweiz, im Rahmen der bestehenden Moeglichkeiten, Loehnung und Verpflegung nachsenden oder ihnen Einnahmen sichern, fuer welche sie sich im Ausland wenigstens das beschaffen koennen, was nach der Haager Landkriegsordnung Kriegsgefangenen zusteht. Sollte die Schweiz besondere Bestimmungen fuer den Aufenthalt von Auslaendern in der Schweiz treffen, so gelten diese Bestimmungen auch fuer die unter 3.) bezeichneten Personen.
6.) Den under 3. bezeichneten Personen wird die Schweiz eine Verguetung (J.Z.:"Belohnung" waere hier vielleicht besser. - Man sollte bedenken, wieviel Schaden sie anstiften koennten, wenn sie, stattdessen, gegen die Schweiz gebraucht wuerden. - J.Z., 3.3.03.) fuer mitgebrachtes Kriegsmaterial zukommen lassen. Grundsaetzlich gewaehrt die Schweiz fuer mitgebrachtes Kriegsmaterial diejenigen Preise, die sie fuer gleichwertiges Material an Schweizer Hersteller oder Haendler bezahlt. Fuer brauchbare Geschuetze, Maschinengewehre, Flammenwerfer, Panzerwaffen, Wagen, Fahrraeder, Vieh, Flugzeuge und fuer Munition jeder Art zahlt die Schweiz das Doppelte.
7.) Unter 3. bezeichnete Personen, die sich schon vor ihrer Meldung von der feindlichen Regierung losgesagt haben und diese Haltung durch Kriegshandlungen gegen die feindliche Regierung zum Ausdruck gebracht haben, erhalten die gleichen Belohnungen und Auszeichungen wie sie Schweizerische Soldaten fuer Handlungen gleicher Art erhalten wuerden. In jedem Falle haben die under 3.) bezeichneten Personen einen Anspruch auf Belohnungen und Auszeichnungen fuer die Zerstoerung von feindlichem Kriegsmaterial und fuer Propaganda im feindlichen Heere fuer den Weltfrieden, fuer Absetzung der feindlichen Regierung und fuer Anschluss and die von der Schweiz unterstuetze Gegenregierung. (Mehrere aber nur exterritoriale Gegenregierungen fuer nur freiwillige Mitglieder waere noch besser! - J.Z., 3.3.03.)
8.) Die Schweiz betrachtet sich als mit demjenigen Teil des von der feindlichen Regierung beherrschten Volkes verbuendet, der under den von der Schweiz festgesetzten Bedingungen Frieden schliessen moechte.
Die Schweiz wird eine provisorische Regierung (J.Z. bessere mehrere, jede fuer ihre Freiwilligen und jede nur fuer exterritoriale Autonomie! - J.Z., 3.3.03.) dieser Volksteile anerkennen, sie unterstuetzen und ein Buendnis mit ihr schliessen.
Ausgewanderte, welche durch Erklaerungen gegenueber Schweizer Dienststellen oder in anderer, geeigneter Weise zu erkennen geben, dass sie die provisorische Regierung anerkennen, gelten als Angehoerige eines mit der Schweiz verbuendeten Staates. Die gleiche Bestimmung gilt fuer unter 3.) bezeichnete Personen.
9.) Die Schweiz verzichtet auf Landerwerbungen und auf die Leistung von Reparationen seitens derer, die an dem Krieg nur gezwungenermassen teilgenommen haben.
10.) Die Schweiz wird sich nach dem Kriege nicht in die inneren Verhaeltnisse des von der besiegten Regierung beherrscht gewesenen Landes einmischen; sie wird aber keine Verfassung oder Organisation zulassen, durch welche einer Gruppe oder gar einem Einzigen die Moeglichkeit gegeben wird, einen Krieg zu beginnen oder Vorbereitugen dazu zu treffen.
11.) Die Anstifter des Krieges werden nach dem Kriege und nach Moeglichkeit waehrend des Krieges nach den Grundsaetzen des Voelkerrechts zur Verantwortung gezogen.
12.) Die Schweiz legt jedem Buerger die Verpflichtung auf, die Regierung in ihren Bemuehungen um die Aufrechterhaltung und die Festigung des Friedens zu unterstuetzen und bei jeder sich bietenden Gelegenheit Auslaendern die Friedensziele der Schweiz darzulegen.
Schweizer Buerger sollen keine Gemeinschaft mit Kriegshetzern haben.
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In Anbetracht, dass seit Jahrzehnten auch in Friedenszeiten zahlreiche Personen in die Schweiz gefluechtet sind, die zum Heeresdienst gezwungen werden sollten oder gezwungen worden waren (allein aus Deuschtland kamen ja taeglich Rekruten ueber die Schweizer Grenze), muessten auch fuer solche Personen Bestimmungen getroffen werden, die der pazifistischen Haltung der Schweiz entsprechen.
Bisher waren solche Fluechtlinge der Schweiz hoechst unerwuenscht, weil sie (scheinbar oder wirklich) den Schweizer Arbeitsmarkt belasteten.
Die Bevoelkerung der Schweiz wird Bestimmungen zugunsten solcher Personen erst dann freundlich aufnehmen, wenn es gewiss ist, dass jeder Fluechtling in der Schweiz Arbeit finden kann ohne einem Schweizer Buerger die Arbeit wegzunehmen.
Einrichtungen dafuer zu schaffen ist aber nicht nur moeglich, sondern es ist sogar leicht moeglich. Es kann erreicht werden, dass eine sich der Schweiz anbietende Arbeitskraft der Schweiz ebenso willkommen ist, wie etwa ein neu entdeckter Wasserfall oder ein neu aufgestelltes Windrad. Ich werde versuchen in einem meiner folgenden Briefe darueber einiges auszufuehren.
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Mit bestem Gruss Ihr - gezeichnet: U. v. Beckerath.
____________________________________________________________________________________________
9.6.1950. Your letter of 6.6.50., received today.
Dear Mr. Meulen,
gift got - - I think - - its present meaning in German simply (by?) (resulted from? - J.Z.) an ironical use of the word. Poison was applied mainly by mixing it into the food of the person or animal whose life got a negative value, to speak the language of Jevons. Insofar the poison was given. If Grimm's great dictionary would still be available in Berlin, I would be able to state when the word was first used in its present meaning. But I will try to get more information from other sources.
My impression is that the English word "poison" (from the Latin "potio" - - drink - - as I learn from Webster) got its present meaning as well by an ironical use of that word, from which it is derived, already among the old Romans who seem to have been very perfect poisoners.
The word "poison" instead of the old Celtic or Anglo-Saxon word, which certainly existed, may have been taken from the Roman legislation, which was early introduced in England. That legal terms replace vulgar terms is often observed, and you will know examples from the English language as well as I know them from the German.
(In my own profession, until 150 years ago, the word "Assekuranz" was in general use for "insurance" and "assekurieren" for "insure". But the different laws concerning insurance used the word "Versicherung". In a few decades the old word "Assekuranz" came out of use, except in conservative Hamburg. The same is true for the word "versichern", replacing the much better "assekurieren". "Versichern" has now in German two quite different meanings, which can only be distinguished from the context.
1.) "insure", 2.) "affirm". In Hamburg the old Union of people concerned with insurance still conserves its name:
"Verein HamburgerAssekuradeure" and is proud of it.)
In Germany the Roman legislation was introduced for a few years before the Battle of the "Teutoburger Wald" in the year 9 p. Chr. (9 A.D. - J.Z.) But - - as Tacitus says - - when the Germans had won the battle and captured the first officer of "justice", they nailed the man onto his law books. That may have been one of the reasons that the Roman law expressions did not penetrated the language of the people.
In Latin as well as in German there is no original word for poison perhaps for two reasons:
1.) In antiquity words reminding of some mischief were seldom and only unwillingly used. You remember that the word "left" in the Greek army language was avoided to accommodate to the soldier's superstition. The leaders spoke of "our well named wing". In the Bible the word "left" is used 77 times, but the word "right" (in the sense of direction) at least 300 times, as I see from Calwer's Concordance.
(J.Z.: Thus, if one perceives the Bible as being, literally, "the word of God", then one can, logically, only conclude that even "God" was, to a large extent, superstitious! - J.Z., 3.3.03.)
2.) Those, who really poisoned others (a crime, as it seems, very frequent in "the good old times") often had to speak to their accomplices in a manner that could not be suspected. So they used words like "gift".
Poisoning was in Germany so frequent in the 17th and the 18th century, that dispensaries were forbidden to sell any poison to women, also not rat-poison.
(J.Z.: It seems that "women's lib", in its most radical form, was off to an early start. Here it is also to be taken into consideration, that most women were neither armed nor trained in the skills of self-defence and weapons, and that all too many of them are brutalised and abused even now, even by their boyfriends or husbands, or as children by fathers, brothers and grandfathers. In such cases poisoning was often nothing but self-defence or justified homicide. - J.Z., 3.3.03.)
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Esperanto. Your standpoint seems well founded and certainly you studied the question more carefully than I did.
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I hope to get "The Malthusian" to-morrow. I do not know what Colin Clark means by "real income".
From a philosopher's standpoint the best off people are the Arab Bedouins. They do have what they want and desire and plenty of it, except precious metals to adorn their women. Mohammed himself - - in general a meek and generous man - - used torture against vanquished tribes to get their gold and silver; he was a Bedouin. (And he had many women; but this - - I think - - does not excuse him.)
(J.Z.: Was robbery among Bedouins and against strangers taking place only to obtain rare metals? Were all their other desires satisfied? - But, apparently, they have practised individual and small group secessionism for a long time. - J.Z., 3.3.03.)
In the last years I read some descriptions by travellers, from which I get the impression that Ireland is still a poor country compared with others.
Island is now a pretty wealthy country and by what? By Free Trade only. If they were not permitted to trade freely, they would be poorer than the Eskimos.
The number of acres per capita in a particular district is quite unimportant if Free Trade is permitted there. By Free Trade Burma's rice fields belong to England and, since a few months, also to Germany. Without Free Trade South America, under Spanish dominion, was a very poor country, where oven rich landlords were unable to pay for glass windows. But at that time she produced more gold and silver - - it seems - - than any other country.
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What you say of the UNO is certainly right. But: does the UNO still exist??????
(Since it is a governmental organisation and one subsidised by some governments, out of tax funds, it still exists, in a fashion, like most parliaments, governmental boards and commissions, as mere expensive talk shops, of no positive significance, but sometimes effective as obstructionist institutions, preventing rightful and productive self-help and free exchanges. - J.Z., 3.3.03.)
What the world now needs would be a Union like the old International Working Men's Association - - a mere private association, summoning the Russian workers in case of a war to rise, form a new Russia and make peace on a new basis with the West. But for that a program is needed, and I can find not even a single person to talk about this point or at least to tell me what my error consists in, if I am wrong here. Everybody, to whom I try to talk about this subject, at once begins to speak of the sun, the moon and the stars and other interesting and important things. But it seems that the brain cells for talking of their own liberty are not yet developed in modern mankind, except in the brains of Russian Communists, who at least talk about the means to suppress it.
(J.Z.: I just came from such a meeting - the local computer user club - of deadbeats, brain-dead, mindless people [mostly old ones, as old as I or even older], when it comes to as important subjects. But discussed was, actually, the cause of two full stops in a file name, instead of only one full stop! That point did interest them! "People dancing at the edge of a volcano", unaware that it is as close to eruption as we may be to WW III. However, many of them can handle their hardware and software much better than I can. But for what purpose? Perfect designs of their own x-mas cards etc.! Electronic banking was also lectured on and discussed - but certainly not FREE banking. The world is in its present mess because the minds of most people are in their present mess. I was also accused of talking too much. I replied, that actually I don't talk enough [because nobody will listen to me, at least not with sufficient interest and intelligence]. - J.Z., 3.3.03.)
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I am curious to rend your letter to the Times on the Schumann Plan.
All fear of German competition could be removed by acceptance and already by discussing the Milhaud plan in the form in which it was presented in the later editions of the Annals of Collective Economy. (I have seen a full set of them only once in my life, at the library of the University of Freiburg, Economics Department. - J.Z., 3.3.03.) Discussing the plan would. in practice mean the acceptance of the plan. It is as plain.
(But it is not as plain and simple a job to get anybody to read and discuss it! - J.Z., 3.3.03.)
Anti-cartel-legislation was much used before the war. It never proved very effective although not quite useless. A much simpler and more effective means would be Free Banking, by which firms not belonging to a cartel could be financed. Rittershausen, in his writings, proved that the real evil of cartels was their exporting at low prices at the expense of inland consumers, but that such a procedure would be impossible under the rule of Free Trade.
Free competition to supply industry with capital: here we agree completely, although - - not quite - - in the means to attain this aim. Liberty would, here, too, provide in a short time the best system and discard the others, and, in demanding this liberty, we agree also.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
14.6.1950.
Dear Mr. Meulen,
by kindness I received this week:
l.) 6 copies of the "Individualist", June issue,
2.) "City Press" of 2. June 50,
3.) "The Malthusian", Nr. 8, 1950,
4.) ''National News Letter", No. 721, 722, 723,
5.) "Truth" of 2. June 50, and 26. May 50,
6.) "Economist" of 20. 5.1950,
7.) Page 1041/1042 of the "Economist" of 13.5.50.
Thank you very much! The literature you send me would be powder enough to blow up the whole social edifice; but it is rather a swamp than an edifice and must not be blown up but drained.
In the "City Press" I read with much interest the report of Mr. Edgar Wheeler, Common Councilman for Lime Street, who just returned from Jordan and Israel. The Jews care a people different from all others it seems. They created "Community Centres" where "they work solely for the sake of their community and receive no financial rewards at all". Voluntary Communism! But the thing must be considered from the standpoint to which monetary science leads.
"Wherever the money consists of "Exclusive Currency", there arise such Community Centres, where men do not pay for what they consume, but get awarded what they consume. The legal organisation of such communities differs according to the culture, the general mentality and the degree of scarcity of money. In antiquity the communities get the form of slave armies, such as Petronius describes them in his "Banquet of Trimalchio"; but, besides them, there existed economic spheres where people were able to pay and were personally free.
The modern Russian "Combines" are economically the same as the antique "familias", although the legal form is very different. (The life of the concerned is not very different.)
The feudal system came into existence not only by wars but also - - and probably mainly - - by the lack of currency after the fall of the Roman Empire.
(J.Z.: That shortage existed already under the Roman Empire and, previously, under the Roman Republic. But it got worse after the downfall, new coins no longer being minted and trade becoming insecure, thus markets absent and little money circulating. - J.Z., 4.3.03.)
Where currency was introduced, frequently the serfs bought their personal liberty. (In Germany they revolted at many places where currency was lacking and founded "Hansa-Staedte".)
Jews, a very cultured people, but unable to conceive monetary liberty, created voluntary Community Centres, which will not produce slavery because the members are free to leave the communities, if the chiefs suppress them and steal from the common product more than is usual in such organizations.
The influence of currency supply on personal liberty is even now hardly investigated by sociologists and - - as far as I know - - not recognised as a factor of first importance, although it is.
Like all modern "captains of industry", he judges the things not very well although he sees them quite well. About Israel he asserts that it suffers from "Inflation". But, not knowing exactly what inflation is, he does not care about the most important factor of inflation, that is, the amount of forced currency in the country and the degree to which it was increased. He merely blames the workers in light metal industries earning L 17 a week, and complains that a suit of cloth made from British cloth costs between L 50 and 60.
The world must now face the fact, that there no longer exists an aristocracy of economics - - like 100 years before - -
(J.Z.: If it really existed, would we have gone through the messes that did occur and still prevail? This "aristocracy" at least partly caused them by not knowing and applying an economic program that was clear and complete enough and well enough defended by them. - J.Z., 4.3.03.)
and that all what modern managers, editors, ministers, bankers and such people say and mean (and do! - J.Z.) deserves the greatest distrust, because they neither dispose of a suitable language to express correct thoughts on economics nor a fit method to observe facts, and, therefore, are generally in error about every detail. Reform plans cannot arise from such a class.
(J.Z.: Often they talk and write as if all that would matter are the interest rate and the exchange rate. They look at the economy with narrow minds and through narrow slits. But they do know all so many details - but have no rational and informed judgement about them. And their minds are full of popular prejudices like a can of worms is full of worms. Enlightening such people seems close to impossible. Anyhow, even if you are in touch with them, they won't hold still and listen, or read, intelligently, patiently and long enough. You might as well try to convert a religious fanatic. Enlightened ideas and arguments and facts must become almost automatically offered, almost everywhere, all the time, so easily, cheaply, convincingly, authoritatively and almost unavoidably, so that those few, who still manage to ignore them, will no longer be taken serious and listened and read but would rather be ridiculed or ignored. The technology for this exists. But no one can, effectively enough, handle it on his own, nor can he himself become a sufficiently enlightened and respected "prophet" without the aid of many, who also extensively utilise all available alternative media within their special interest spheres. The supposed "free market of ideas", in print or speech, in mass media or on the Internet, does not yet organise such an enlightenment automation sufficiently and spontaneously, in a decentralised as well as centralised way, but has just established another swamp of mutually opposing ideas, opinions and systems, without arriving at tolerance for diverse actions tolerantly practised and at methods for systematically and very publicly refuting all untruths that are widely held to be true and are obstacles to progress. In spite of automated search engines by the hundreds, if not thousands, truths still get buried there as they did before, e.g. in books and periodicals. - J.Z., 4.3.03.)
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Most interesting is the "Individualist". The numbers "57 s" and "67 s" a week, at the first page, second break, are striking. I communicated them at once to friends. I think from the two numbers may be derived, at once, the program point of Individualism: "" The State has no right to intrude services which those concerned are able and ready to render themselves." That they are able, they still do not know at present. (That is the result of 300 years of political economy!)
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Chinese marriage law reform. Experience in oriental countries seems to have proved that a law which permits divorce by mutual consent does, in practice, permit a man to divorce as he likes. The same experience was made in Prussia before 1900, when the present civil law came into operation. Before 1900 Prussia's civil law was the "Landrecht" of 1794, a good law. It stated that slavery in Prussian territories was unlawful and an addendum of 9. III.1857 prescribed:
"Par 1.) Sklaven werden von dem Augenblick an, wo wie Preussisches Gebiet betreten, frei.
Das Eigentumsrecht des Herren ist von diesem Zeitpunkt an erloschen."
(Slaves are free from the moment that they set foot on Prussian soil. These property rights of their masters are void from that moment on.)
In India the situation of women after divorce is very bad. I am afraid that it will be bad in China, too. Women without a manly "protection" by a husband, son or father, are in China quite helpless. Moreover, they are very ignorant, because the manners do not permit them to listen to the conversations of men. Manners must become like those in Burma, where every woman may, at any time, find a living by a little trade. The greatest part of Burma's petty trade is done by women.
H. Fielding Hall, an English officer residing many years in Burma, very well instructed and quite impartial, says in his excellent book: "The Soul of a People", (first edition 1898, reprinted 1899, 1902, 1903, 1904, 1905 and, probably, later, too - - I possess the edition of 1905: "It is strange, talking to Burmese girls, to see how much they know and understand of the world about them."
You say: "Evidently China has no need to encourage more births." - When I had read it this, I went to the British Information Centre and looked there at the Statesman's Yearbook, edition 1949. I found: China's population, all provinces: 457 390 000. Area: 3 380 692 square miles. That would be 135 per square mile.
The arable land is said to be 192 060 square miles, which would be 1/17th of the area. If the numbers are true, then there are certainly still possibilities to make more land arable. Of course: without credit - - not on the basis of the present-day paper money - - this cannot be done.
What China needs is:
1.) Credit and a money standard which makes it economically possible,
2.) better transportation facilities; but they are a matter of credit as well,
3.) a better administration, by which men, property and credit are safe.
I heard from Chinese and read in books of travellers that only 1/7th of the land which could be cultivated, is cultivated. The best book on the subject was that of a German engineer, who visited the interior of China on behalf of a German bank. He was to lock out for investment possibilities. I forget his name, and the Prussian State Library, from which I borrowed the book, is largely destroyed.
I am convinced, that China needs to encourage more births. What Malthusians say about the matter deserves no
attention. Their logic is displayed in "The Malthusian" of May 1950. There is said, that Ireland is now one of the richest countries. (Which is certainly not true, but let up, for a moment, assume it would be true.) The good economic situation is ascribed to the diminution of the population from more than 8 millions to a little less than 4 millions. But, in the years before the French Revolution, Ireland had exactly the same population as now and it was one of the poorest countries in the world. (Page 1 of the Malthusian.) From The Malthusian's own text it must be concluded, that the number of men in a territory has not much to do with their standard of living. Ireland will always be a good example for that statement, although she is far from being such a rich country as the "Malthusian" and its informant - - M. Colin Clark - - believe.
You should write an article: China's problems to be solved by Free Banking and not by Malthusianism. I am convinced that it would arouse attention.
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Some mathematicians suggested, that the population question may be considered from a standpoint very different from that of Malthus. "Great men", such as great scientists, great poets, great legislators, etc. are only possible in a large population. Suppose - - they said - - there are 6 qualities required to form a good legislator. Suppose further, that, in the average, one man among 10 possesses such qualities, then it is probable, that in a population of 1 million adult men just one man possesses the six required qualities.
For a money reformer, who deserves that name, there are, - - I think - - at last 10 qualities (and conditions - J.Z.) necessary, and it would be optimistic to believe that one man among 10 possesses one of them.
These qualities are:
1.) a good education,
2.) a real taste for the gifts of a good education.
(I know women - - and you will know such women too - - whose parents spent much money for their
education, but at the very day when they get married, they jettisoned all that and displayed their true nature,
which was no better than that of one of the dirty, crying and stupefied women who, on pay days, fill the
saloons.)
3.) the gift to speak convincingly,
4.) the gift to write convincingly,
5.) a profession which corresponds to his education,
6.) plenty of time to study the matter,
7.) still more time to work out o good plan,
8.) an income - - even if it be small - - which enables him not to think the whole day about the necessities of life,
9.) a milieu that is free from noise at least some hours a day,
10.) being well married - - or not married - - so that he must not hear, the whole day, lectures about household matters and reproaches, that he did not attain what other men achieved, such as the big grocer opposite, etc.
An easy calculation shows, that, probably, among 1000 million of adult men there is one money reformer, who deserves that name.
Therefore, to get more than one money reformer in each generation, that means, in this case, one who is able to continue the propaganda for Free Banking, we went births, births and many more births. (Yes!)
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Russian gold. You say: "… conversion ... into gold at a fixed paper price, which is essential to a gold standard."
There are several gold standards. Yours is the Ricardo type. If that type would have been the single possible one, then the Romans, at the time of the emperors and, especially, after Constantine, were not on a gold standard. They did not possess banks if issue, whose paper could be converted into gold. The same is true for the kingdom of Naples, whose standard were gold coins, which had a fixed price expressed in Dukats, the latter being a mere money of account (in Naples). Bremen was on the same kind of standard, the "Gold-Thaler" being a mere money of account. But all gold coins in use had their fixed price in this "Gold-Thaler", so that if - - say - - Prussia coined "Friedriechsd'or", she supplied - - much against her desire - - Bremen with money. But all economists agree that Imperial Rome, Bremen and several Italian States were on a gold standard. I think that, in this case the consensus sapienti is of some weight.
I subsume the Greene-Tucker-System also under the notion "gold standard", although it excludes the conversion into gold on demand of the note-bearer. (Except on the free gold market! - J.Z., 4.3.03.) The same applies to the system of the "Four Bills".
The German language possessed for a long time, for standards like that of Bremen, the word "Rechen-Waehrung".
(Gold-accounting or gold-clearing standard. - J.Z.) It seems, that the word was first used for the standard of the Hamburg Giro-Bank (not note-issuing) whose money unit, the "Mark Banko", was not coined. 59 1/2 Mark Banko were 1 pound (weight) of fine silver. (Which "pound" was it? There were at least a dozen different ones! - J.Z.) When the Reichsmark was introduced, this relation was fixed: 1 Mark Banko = 1.50 Reichsmark. A second relation, equal to the other, was: 27 3/4 Mark Banko = 1 Mark of Cologne (Koelnische Mark = 233.8548 grams fine silver. The circulating Hamburg money contained less silver (of course - - it was administered by a State, the Mark Banko by merchants), so that 34 1/2 Mark Courant were equal to 1 Koelnische Mark.
The old Mark Banko was in wide use in Northern Europe until 1870.
It seems modern English does not possess a term equal to the German "Gold-Rechen-Waehrung" or "Silber- Rechen-Waehrung". (Gold-clearing or gold-accounting standard. - J.Z.)
You know that I judge the real standard of a country from the unit in which prices are fixed. In the last period of the large German inflation, most prices were fixed in gold, although there circulated no gold coins and the circulating paper money was not convertible. But the price of gold at the Exchange was daily published in the journals. Insofar it can be said, that great parts of Germany were on a gold standard already long before the stabilisation at 19. XI. 1923.
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What concerns the shouts and groans from Russian barracks, you heard that, that - - I think - - from Frankfurt / Main. (Russian barracks at Frankfurt/M? Rather: Frankfurt/Oder! - J.Z.) The people, who told you, may have been well informed. But if such groans were heard in barracks near Berlin, people would have supposed that there German women were violated. (The rapes of them by Russian soldiers, usually not the frontline ones, were not forgotten yet. - J.Z., 4.3.03.)
Russian soldiers are often to be seen in the Eastern sector of Berlin, especially in the evening, when their service is over. They do - - I heard - - much service, and their education seems to be the best possible. (Certainly not on all individual rights and liberties, including the economic ones! - J.Z., 4.3.03.) The first what the Russian soldiers learn is shooting. The first what German soldiers learnt was saluting their superiors.
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I hope to write in one of my next letters something about the papers you were so kind to send me.
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Very faithfully Yours signed: U. v. Beckerath.
____________________________________________________________________________________________
16.6.1950.
Dear Mr. Meulen,
as "Printed Matter, I send you
I.) Nr. 50 of the "Berliner Wirtschaftsblatt". the Report of the Bausophon-Company and its Apparatus for persons hard of hearing will perhaps interest you;
II.) a clipping from the "Tagesspiegel" of 15.6., containing
a.) an appeal to the West-Berlin population from the Committee of Inquiry of anti-dictatorship lawyers of (? I
suppose they were from the "Ostzone" and had escaped! - J.Z.) the Eastern Zone, concerning Wilhelm
Zaisser, a chief of the Eastern political police.
b.) a report from the Einstein School at Potsdam, from which may be seen that the Eastern Youth is less
submissive than the older generation.
The mentioned Committee is much feared in the East. It is believed that, perhaps, one day the Russians will leave Germany. If that happens, then some hours later certain chiefs of the SED (Sozialistische Einheitspartei Deutschlands) will hang at those trees, which are not yet cut down by the Russians.
(J.Z.: Another typical exaggeration by B. Although many were cut down, during the Nazi time and post-war years, forests still existed there. Satire! - J.Z.) The first who will hang, will be those whose names are publicly exposed, like that of Mr. Zaisser.
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If the Allies should leave Germany one day, then there must be appointed an authority by the UN, with absolute power to declare void all measure against humanity executed by German authorities.
What induces me to this remark is the fact, that daily many dozen refugees are sent back to the Eastern Zone. The real cause is, that the West has no work for them. (A motive, or an opinion, without a real cause. Jobs are there - but under monetary despotism they cannot be freely financed. - J.Z., 4.3.03.) But sending back fugitives to the Eastern Zone is not better than murdering them, what the authorities - - of course - - know as well as everybody knows it.
(J.Z.: Although many "politicals" disappeared in Eastern concentration camps and prisons, tortured to death or outright shot, like some involuntarily returned deserters from the Red Army, I do not believe that of the ten-thousands of refugees from the Eastern Zone, who were involuntarily returned to it - many returned voluntarily, because they were kept like animals, penned in, in refugee camps in the West, not allowed to look for work or accommodation - many or most were actually murdered, although, certainly, none of them were safe, before they had fled or after their involuntary return. All will have suffered somewhat from having been returned, e.g. loss of their accommodation, property and jobs. But not all or most were murdered. News of that could not have been kept secret. They would have leaked out - and didn't! One should not malign even the devil. Slaves are owned and exploited. So are forced labourers. They are not always killed. B., too, made some rhetorical points. After all, this is not an objective article, but just a letter to a friend. - J.Z., 4.3.03.)
There cannot be a difficulty to define a measure as inhuman. There are measures which the officials themselves would call inhuman - if they were the victims.
(J.Z.: Maybe, all of the politicians, who voted for the present concentration camps in Australia, for illegal immigrants, will, at some time in the future, if they have not yet died a natural death by then, have to spend some years, or at least some weeks, in these camps, too, together with all the loudmouths, who publicly demanded such camps for these refugees. They might be forced to study why this internment was altogether wrong and unnecessary. Or, a genuine courts of justice might come to decide that they ought to be deported as undesirables. - J.Z., 4.3.03.)
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Did you read in the "Malthusian", May-edition, the article of Edwin Muller, "How to Lessen World Hunger"?
The article is rather anti-Malthusian. It explains how in India and in China the absolute lack of capital prevents the peasants from acquiring even the most primitive tools. What the reporter, Dodd, did not see, that was: neither the paper rupee nor the paper-Yüan is an economically possible basis of credit. Credits on another basis are prohibited, just like in Europe credits on another basis than the government-administered paper-money are prohibited.
That India does not lack capital, is proven by the good market for Indian loans in India at the time, when the rupee was a gold rupee or - - earlier - - a silver rupee. The Indian buyers of the loans were content with 6 % p.a. interest, although the usual interest for agricultural loans still is - - since many hundred years - - 5 % per month.
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
U. v. Beckerath, … 17. 6. 1950.
Dear Mr. Meulen,
A. S. Parkes, F.R.S. says in the May-issue of the "Malthusian":
"To those who believe that pressure of population is, ultimately the chief cause of war, the activities off the administrators and the medical scientist must at best seem rather double-edged." (He speaks of the Royal Society of Tropical Medicine and Hygiene.)
Do you know one war in the last 3,000 years whose ultimate chief cause was population pressure, these words used in the sense of Malthusians???? And what concerns Africa: Is it not well known; that 100 years ago, when the population was much was much smaller than 1/2 of the present, the natives were in continuous warfare? Will Parker assert, that these wars ameliorated the support of the inhabitants?
F.R.S., that means, for all I know: Fellow of the Royal Society. These fellows are all very well educated, learned and trained. And yet: quite obviously, Parkes did not ask himself such questions.
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Among my burned books was the "Insurance Cyclopedia" of Walker, a very good and valuable work in several volumes. Inter alia, it contained a set of all famines known so far. The most terrible famines occurred at the time of
Charles "the Great" and his successors. That one of their causes was lack of transport facilities is clear. That overpopulation was not one of the causes is here clear, too. The famines were at that time at intervals of about 10 years, in the average.
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Buffon said: All empirical quantities of matter and force are limited. Forces of unlimited power do not exist.
Really it is now - - as a consequence of Einstein's Theory - Buffon being forgotten - - admitted, that e.g., the dimensions of all plants and animals are limited by their constitution and that there is a connection between their size, their lifetime and their constitution. Connected with all other properties is also the normal number of the beings. As long, as it is not attained, there is a strong tendency to replace the dead at once by births. (Quite striking is the increase of births after wars and famines.) If the normal number is attained, the sexual desire diminishes.
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The USA and Western Europe are still equal in numbers to Russia. But the Russian Army increases every year by one milion of trained men and that simply by the Anti-Malthusianism of the Russians. The West needs now the same degree of Anti-Malthusianism and the following technical conditions:
1.) Free trade,
2.) FREE BANKING,
3.) a money standard fit for credit,
4.) a better military organisation and
5.) more interest for the own affairs.
Free Banking versus Malthus, and hammering this slogan into the heads, that should be our aims".
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
21. 6. 1950.
Dear Mr. Meulen, (Desertion - J.Z.)
in the Article "Turkestan", Meyer's Konversations-Lexikon, edition 1889, I find this passage: (Desertion - J.Z.)
"Im Winter 1876 - 1877 hielten die Chinesen Urumtschi, Jakub Beg hielt die kleine Festung Dawantschi besetzt. Die Truppen Jakub's waren in moralischer Beziehung merklich schlechter geworden. Die Desertation nahm ueberhand. Selbst auf die bis dahin ergebensten Diener konnte Jakub nicht mehr rechnen. Die Ueberlaeufer wurden von den Chinesen sehr freundlich aufgenommen. Am 3. April 1877 rueckten die Chinesen aus Urumtschi gegen Dawantschi aus. Nach dreitaegiger, schwacher Verteidigung verfuhr der chinesische Oberbefehlshaber Lu Tscha darin sehr geschickt, dass er sie zum Teil wieder frei liess und ihnen versicherte, dass er lediglich Krieg mit Jakub Beg fuehre. Um die Verbreitung dieser Nachrichten zu verhindern, wurde ein grosser Teil der zurueckgekehrten Gefangenen auf das Geheiss des Badaulet ermordet. Diese Massregel erregte in ganz Kaschgarien den bittersten Hass gegen den Khan. etc." (Badaulet = the fortunate, was one of the titles of Jakub Beg.)
I try to translate the text:
"In the Winter of 1876/1877 the Chinese held Urumtschi, while Jukub Beg occupied the small fortress Dawantschi. The morale of the troops of Jakub had become noticeably worse. Desertion became excessive. Jakub could not even count any longer even upon his so far most loyal servants. The deserters were very kindly received by the Chinese. On the 3rd of April 1877, the Chinese left Urumtschi and besieged Dawantschi. After a not very strong defence, lasting three days, the fortress surrendered, also Kunja-Turfan. The treatment of the prisoners by the Chinese commander-in-chief, Lu Tscha, was very skilful, in that a released a part of them. He assured them, that he was at war only with Jakub Beg. In order to avoid the spread of these news, a large part of the returned prisoners was murdered upon an order of the Badaulet. This measure provoked the most bitter hatred in the whole of the Kaschgaria against the Khan. etc."
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I take it from this description that the military technique, employed some months ago by Mao, seems to be an old practice in China. Insofar, it seemed to me important. The article refers to the English translation of Kuropatkin's "Kashgaria", London, 1883.
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Kong Fu Tse - - about 2,500 years ago - - reports a similar kind of warfare by the old Chinese king Wen.
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A reprint of the relevant passages from Kuropatkin or another author would be worthwhile for its anti-militarist interest.
I am still convinced, that the methods of Mao and of Lu Tscha are apt to finish every war in favour of the leader, who possesses courage and prudence enough to apply them.
But the soldiers must be able to be confident, that their country will not be worse governed by the new ruler than by the former one, who forced them to enter into his army.
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Very faithfully Yours - signed : U. v. Beckerath.
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6. 7. 1950. Your letter of 4. cr., received today.
Dear Mr. Meulen,
here enclosed a letter which I wrote to Zander. (I do not have it on hand at present. - J.Z., 4.3.03.) I had not the time to translate it.
In the district Neukoeln, some kilometres from Friedenau, 13 schools are closed because they are without water. During the first blockade the Russians did not block the water.
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That your health improved so pleasantly is one of the very few good news that I received these days. I congratulate you and more the individualistic movement in England, which is now based on your health.
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"Truth". Every paper you were so kind to send me is still at hand, except those burnt in 1943. I never destroy a paper or a clipping which you sent me. The last two copies were of 2. VI. and of 26. V. 1950. These copies and the others of this year, which you sent me, did not contain a review of a book By E. Marshall Tardy on fishing. If you meant a copy you sent during the last days, I will certainly receive it this week. Then you will get the said cut at once.
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Refugees from the Eastern Zone. I read that in the "Bundesrepublik" a new law is prepared to diminish the number of refugees sent back the East. Today I found an article in the "Tagesspiegel" of 10.6. 50, which I enclose and where the situation of the refugees is described who come to Berlin.
The treatment of the refugees has confirmed my opinion that the West is not yet in a mental state to govern itself. A supreme government to prevent obvious cruelties is necessary. At present, only the UNO can produce such a government. I think a High Commissioner of the UNO would be accepted by the population without much resistance.
Would the Editor of the "Times" have sent your letter of 23. 6. to the British High Commissioner and could it have, in this way, induced the new laws in favour of the refugees?????????
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UNO. You say: "… as witnesses the Socialists in Germany and England in 1914."
If some time before 1914 England would have accepted war laws as I proposed them in my letter to Dr. Picard of 6.5.50. (You get an attempt of a translation.), then not the Socialists alone but very many soldiers from all parties would have come from the German front. Such an action has nothing to do with military strikes as Hervé tried to prepare them in his book "Leur patrie", and as you think in your letter. I agree, that the soldiers would not have come in August 1914. But from very numerous observations of my own, in the years 1916-1918, I know that the situation was very different in these years.
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Chinese marriage laws. What concerns the principle you are right. But you know the obstacles to realise the principles as well as I know them.
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Malthusianism. You say: "… surely you would not advocate larger populations before Free Banking is established, except as a military measure."
That is not my opinion.
I advocate larger populations for all cases where
1.) the peasants find difficulties in selling their product. Those difficulties make it probable that not scarcotu of
victuals is the cause of hunger but difficulty in selling is.
2.) the production of victuals could easily be increased by capital and credit, especially in the cses where capital and credit are waiting to be applied but cannot be, for the well-known reasons now existing in most countries of the world and most of all in the Far East.
All Malthusians' opinion (but I hope: not yours) is:
If by ignorance or indifference or superstitions - - economic and others - - men are prevented, by governments or by their own faults, from producing the victuals that intelligent, active and well governed men will produce, then - - of course - - the means that mostly suggests itself is birth control to overcome difficulties. The some means is mostly suggesting itself when, by bad laws or extraordinary stupidity of the people itself, the victuals ready for exchanges are not exchanged, although all technical possibilities for this are given.
Birth control, under conditions here indicated, will have no better effect than the processions in Catholic countries or the sacrificing of young girls to the holy crocodiles of the Ganges in tines of distress. The very contrary is the case. If people are convinced, that by birth control the economic conditions can be improved, then they are inclined to neglect all other means, also those really at hand and in their power, and they demand more birth control when experience teaches them that the former birth control remained without effect.
Malthusians would continue to demand birth control even if England would be reduced, by former birth control measures, to the population at the time of William the Conqueror and the misery would increase, as a natural consequence of such a small population.
The larger the population is, the greater is the probability, that among this population some men will live, who are convinced that burning victuals is a bad measure and excluding victuals, by self-blockades, called "protective duties", is no better measure to prevent hunger. The probability is also given, that in a large population men will be born who conceive: Free Banking procures more mean of payment than the procedures of the blockheads now ruling the world's Central Banks.
I advocate the contrary of birth control as one of the most effective means for social and economic betterment.
The mentality of birth control originated in the dark times when priests of Cybele castrated themselves in honour of their goddess. This mentality was introduced into Christendom and from there it came by the priest Malthus to us. Malthusianism and Christian faith are in very good harmony. As long as that faith is taken serious, Malthusianism will be taken serious, too. But we are no Christians.
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Some months ago I bought a book for 50 Pfennig: "Durch Werkstaetten und Gassen dreier Erdteile", by Edmund Kleinschmitt, 1928. The book contains contributions to the seeming overpopulation in Japan. These contributions are all the more interesting as the same economic conditions, as here described, prevail also in the largest part of China, Indo-China and Korea. Let me reproduce here the German text, page 123.
"Die Haelfte aller Farmer in Japan sind Paechter. Theoretisch koennen etwa noch 2 Millionen Hektar Land kultiviert werden, davon etwa 0.4 Millionen Hektar fuer Reis. (1 Hektar = 2.47 acres)
Auf diesem Gebiet koennte der Reisbedarf von 35 Millionen Menschen mehr befriedigt werden. ….
"Es gibt in Japan 5,5 Millionen Bauernfamilien: davon haben 3.7 Millionen weniger als je 1 Hektar Land. Die Pacht fuer Reisland ist hoch. Sie wird in natura bezahlt und betrug nach der Schaetzung der Hypothekenbank von Japan im Maerz 1927 fuer mittleres Reisland 10,2 koku (1 koku = 6 Hektoliter.) (From Hering's Conversion tables I see 1 koku = 4.96 bushels.)
"Zieht man in Erwaegung, dass die durchschnittliche Produktion im Jahre 1926 nur 18.9 koku auf 1 Hektar ausmachte, so ergibt sich daraus, dass die Pacht mehr als 50% der Ernte betraegt. (Und danach kommen noch die Steuern und unvermeidliche Unkosten! - J.Z., 4.3.03.)
"Im Durchschnitt rechnet man fuer die Ernaehrung eines Japaners, dessen Hauptnahrung Reis ausmacht, 1 bis 1.2 koku das Jahr.
Stellen wir uns eine Paechterfamilie mit vier Koepfen vor, die 1/2 Hektar Reisland besitzt, darauf 9 1/2 koku erntet und davon rund 5 koku an den Landeigentuemer abgeben muss, so bleiben ihr etwa mehr als 4 koku, die gerade zur reinen Ernaehrung der Familie notwendig sind. Diese Ueberlegung macht deutlich, warum in Japan das Elend der Landbevoelkerung und insbesondere der kleinen Paechterfamilien sehr viel mehr im Vordergrund steht als die wirtschaftliche Lage der industriellen Arbeiterschaft, Die hier angefuehrten Zahlen sind dem "Japanischen Jahrbuch von 1928" entnommen."
(J.Z. - translation: Half of all farmers in Japan are lease-holders. Theoretically about another 2 Million Hectares could be cultivated, and from these about 0.4 Millions for rice. [1 Hectare = 2.47 acres.] On this land the rice requirements for another 35 million people could be satisfied. …
There are in Japan 5.5 million peasant families. Of these 3.7 million have less than 1-hectare land each. The land for rice land is high. It is paid in kind, in rice and amounted according to the Mortgage Bank of Japan in March 1927 for average rice land to 10. 2 koku (1 koku = 1.6 hecto litres.) (From Hering's Conversion tables I see: 1 koku = 4.96 bushels.)
If one takes into consideration, that the average rice production in the year 1926 came only to 18.9 koku per hectare, then it follows from this, that the rent came to more than 50 % of the harvest.
In the average one reckons that the food for one Japanese, who mainly eats rice, comes to 1 to 1.2 koku p.a. If we suppose a peasant family of 4, who works on 1/2 hectare of rice land, harvests 9 1/2 koku from it and has from this to deliver to the landlord about 5 koku, then only a bit more than 4 koku would remain to just nourish that family. This consideration makes clear why in Japan the misery of the small lease holders is much more outstanding than the economic position of industrial workers. The figures here cited are taken from the "Japanese Yearbook of 1928.")
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From the here reported facts it can be seen that reducing Japan's population to - say - 1 million, would not improve the tenants' situation, if the old system of rent is continued. If the peasant is compelled to cede all production, which is not necessary to maintain his producing power, to the landowner, then density of the population may be as in the Sahara: the peasant remains as poor and as hungry as he is and was.
In Korea and in China the Communists say to the peasants: Keep half of the rent and give us the other half, and then we will slay the landowner! That's a program and easy to be realized.
(J.Z.: Somewhere else B. said that in China they promised to reduce the rent to 25 %, from a previous up to 75 % and, naturally, they would have kept silent about their collectivisation and mass murder intentions. Where can one get the true figures, that of the promises and that of the result of these promises? That there was no great love lost between the tenants and the landlords seems rather obvious. But a peaceful and rightful land-reform program seems to have been absent there as well. It would also have required sufficient knowledge of monetary and financial freedom. - J.Z., 5.3.03.)
The program is also convincing; it's in itself a propaganda. Concerning pity for the to be slain landowners, the peasants say: We will apply to them the same kind of pity - which they showed to us, when we could not pay our rent.
But in the next issue of "The Malthusian" will be printed and "proven" that the misery of Japan can only be removed by birth control, and thousands of - - in other spheres - - intelligent Englishmen will say: "How is it pos-sible to overlook such convincing proofs!!"
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Much honour for me is in your letter of 4.7.1950 to "The Malthusian". What concern the "Lebensraum" of Germany, the Germans and all their governments (not only that of the Nazis) would not and therefore could not see, that what the Germans needed was Free Trade in victuals. But the government stood "between two chairs". Free Trade in victuals meant a revolt of the peasants and "protective duties" on food were very unwillingly accepted by the workers. What to do? Very simply: They said both: We ("we!!") must conquer the Ukraine, Poland, etc. The conquered land will be distributed to German peasants. There the peasants will produce the victuals needed! That pleased all too many of the peasants and too many workers. Until the moment came, when Hitler mobilised. (Some people really believe in their nonsense! - J.Z., 5.3.03.) Now the people conceived what before they were mentally too lazy to conceive. The terror was general. The mobilisation took place in general consternation and silence.
Very different from the mobilisation in 1914.
But I must admit that from 1933 to 1939 the slogan with the "Lebensraum" was a very good propaganda for Nazism.
To get a full insight into the real situation, one must read the agrarian papers from 1930 (when the crisis began) to 1933. From every part of the country wore reported facts like: "The butt49 could not be sold. It was used as axle grease." And that was no fable. I got very good information on that. "Wheat could not be sold. It must be fed to swine."
I dare to say to a peasant: "What a good luck for your, that by the Versailles Treaty the province Posen was yielded to Poland! Posen was an "Ueberschussgebiet" (area of agricultural surplusses - J.Z.) of the first rank!" He looked very stupified and did not know what to answer. But since Mathus did not distinguish a distress caused by too much food (unsold! - J.Z.) from a distress by a lack of victuals, the Germans seem excused.
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Gold standard. From Jevons' "Money" and other books (all burnt) I learnt, that English economists admitted the possibility of a gold standard also for countries without paper money. The meaning of the expression "gold standard" has been changed by the writers of the last decades. That's all.
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Capital in India. I think the facts must be recognised, because they can today be still and easily verified:
1.) The interest in Indian villages is, usually, 5 % per month.
2.) Railway bonds, yielding 6 % or so, p.a., were bought for large amounts by rich Indians. Already the first issue of Indian railway bonds was bought, for a large amount by Indians. That may have taken place 70 or 80 years ago.
Even if the real cause could not be detected for which rich Indians preferred the 6 % (or 5%) p a. of Indian railway bonds to the 5 % monthly to be got at Indian villages, the fact must be acknowledged.
(J.Z.: Lending to impoverished peasants, for whom sales of their surpluses were not assured, was a risky business, just like lending money to gamblers. The interest rate corresponded to that risk. - That is one hypothesis. Brahmins may also have been too proud to lend money to low class Indians. That's another hypothesis. Most Indians rather kept gold and silver as jewellery than get it coined for circulation, thus making even metallic currency unnecessarily scarce. That's a third hypothesis. Someone will bother to dig for the truth on the matter and publish it, the sooner the better. - J.Z., 5.3.03.)
In every large European town, London as well as Berlin and Paris, there are money lenders at the covered markets, who lend money to the retailing men and women. There is - - to give an example - - a little dealer, who could easily re-sell apples, which he buys in the morning for 10 marks, for 20 marks, so that he wins 10 marks and the purchase price of 10 marks, together 20 marks. But he has not got 10 marks in the morning, a the wholesale market. He has nothing, probably because he wasted all in drinking the night before. The money lender lends him 10 marks on the condition that he gets back 11 marks the next day. Securities are not usual. It is very seldom that the money lender is not repaid. The interest is in this case 10 % daily. If one possesses 1,000 marks in cash and knows the people and the trade (very essential), he may get a good income and tax-free, too. And yet: if the same man wins - - say - - by an inheritance 100,000 marks, he is content with 6 % or so. Why??? You know it. (! or ? - the edge is cut off! - I assume that it is because a bit of work, at least experience and time spent at that place is involved and one has to get up early for it, as well. It is not necessarily a pleasant or inherently attractive job. - J.Z., 5.3.03.)
Let me add, that the market women do not consider the money lenders as usurers. Indeed, the interest they pay is quite negligible for them and, in my example, it comes only to 1/10th of the earnings.
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Very faithfully Yours - signed: U. v. Beckerath.
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7. 7. 1950. Your letter of 6.6.50.
Dear Mr. Meulen,
what you say about my letter to Dr. Picard is quite right. But what in my letter is contradictory to the principles you state in your letter? My proposition holds true for every country, small or great, for Monaco and for the USA.
And what you say in your letter of 4. 7., of the usual war proclamations, the parades, and the music bands, is certainly true, but only remains true until the first grenade shell whistles. You know that sound from your own hearing. If, at this moment, there is not a strong and sincerely believed principle behind the orders that sent the men to battle, the men ask: Where is the chance to escape?
It is not cowardice which lets the men speak so, but the unwillingness to be misused.
Yesterday I read some pages of the History of James II of England. He was at last left by his soldiers. You know the details as well as I. They prove that the possibility for bad governments to misuse their soldiers is not limited to today but existed already some hundred years ago. Here are characteristics of human nature which moralists do not consider and historians seldom see in the right light. But, they do exist.
I read that the very prudent resolution was taken to let the Allied fight under the UN flag. Indeed: If Trygve Lie possesses energy and sees the things as they are, he can change the world completely. But he must publish a proclamation as I devised it in my letter to Dr. Picard.
In this case Trygve Lie must also publish a program about the land-question and the peasant question in the Far East. If he does not, then the 400 million subjects of Mao will be easily convinced that the Americans fight merely to restore the old land system and Mao will win.
(J.Z.: From an Australian soldier, who had served on the UN side in the Korean war, I heard that the attacking Chinese soldiers were as unwilling to fight, that they had to be drugged before their attack, so much so, that they were just able and willing to stumble ahead, firing wildly, but not aiming their guns and not seeing what was happening right and left before them. Thus some Australian soldiers felt safe enough to stand up and shoot them, one by one, like clay pigeons! Maybe, that that was a rare case. Maybe it was typical. Well known is, that before many a battle a tot of rum or other liquor was issued to the men, if available. On the other hand, there were reports after the Korean war, that up to 9/10th of the UN soldiers, when attacked, just ducked into their fox holes and fired wildly into the air. Whatever aimed shooting against the attackers was done, was done by the remaining 10%. Thus the soldiers on this side, too, were certainly not, in most cases, quite willing war heroes. But when it comes to the situation of: Shoot or be shot, then, most of them, will shoot. And once some of their friends have been killed or they have seen some atrocities, committed against POW's, then many of them do begin to fight with a will. - J.Z., 5.3.03.)
What was the ultimate cause that Napoleon got so obedient soldiers? The soldiers, for the greatest part, were sons of peasants and the Royal Family had proclaimed: The first thing we do, when we return, is to restore the old feudal system. The soldiers defended their personal property.
Concerning Tshiang Kai Shek: I think that he will, in the next weeks, offer his little army to Mao and fight at the head of that army against the Americans. In this case his soldiers will follow him with enthusiasm, which, at the moment, they are certainly far from doing.
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A journal which would be willing to publish articles about such subjects!!
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Very faithfully Yours - signed: U. v. Beckerath.
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9. 7. 1950.
Dear Mr. Meulen,
today I received the packet of newspapers announced in your letter of 4.7.50.
1.) Truth of 16.6.1950. I return the copy today and you will see from it, that it did not contain a review of a book by E. Marshall Hardy on fishing. I looked for the review in every copy of the other papers in your packet. It is not contained in any of them. If you do not want the copy of 16.6.1150, I take the liberty to beg you to return it to me occasionally.
2.) Economist of 10.6.50.
3.) Statesman and Nation of 17.6.50. You marked at page 677 a quotation from the "Badische Neueste Nachrichten" (CDU = Christliche Demokratische Union) where this paper asserts that in the year 1949 about 100,000 skilled workers, scientists and artists went to the Soviet Zone, while the people from the continuous flow of refugees from the Eastern Zone are described as "mostly unwilling or unable to work".
I sent the copy to Rittershausen, who certainly possesses better information than I can get in this Abdera. He will write to you. I think it impossible to get a statistics from which may be derived that "100,000 skilled workers, scientists and artists" left the Western Zones and entered the Eastern. How would the skilfulness of the persons be statistically stated? The number "100,000" seems "round" and reminds a little of the numbers in antique or biblical reports. I think this "information" comes immediately (rather, indirectly! - J.Z.) from some Soviet office.
On the other hand, the number of valuable immigrants to the Eastern Zone should not be underestimated. It is an immense moral and economic asset for the Soviets that they are willing and able to provide employment for skilled workers, for scientists and artists, provided they are not anti-communists. Many more than 90 % of such people do not care about politics and are quite ready not only to remain politically neutral but to join the SED (Sozialistische Einheitspartei Deutschlands - - the ruling party) if the get a good job and enough to eat. What concerns science, the Russians really hold it in high esteem, treat scientists and scientific institutions well and my impression is: much
better than the West does. Most appreciated is medicine. I heard that the "Charité" (founded by Frederic II. in Berlin) still preserves its old reputation as one of the best medical institutions and hospitals in the world. The same applies for institutions for agricultural research. Here I know something from personal observation.
The reproach that the refugees are mostly unwilling or unable to work is unjust.
(J.Z.: Not quite: At least for a period is was the policy of the East German regime to grant permission to emigrate to West Germany only to persons to sick or old to work and to induce these people to emigrate! They wanted thus to over-burden the social security system of the West, while easing this burden for themselves. - J.Z., 5.3.03.)
That the refugees are unwilling to accept work which destroys their professional abilities is clear. A watchmaker, who must work in the ruins and sort the bricks (which playing children often jumble together after 17 o'clock, when the work in the ruins ceases), gets many little wounds on his hands, so that he is hardly able to do a watchmaker's work later. From time to time a journal writes some lines about such conditions, but nobody
changes them.
4.)"Individualism" of June 1950. Interesting insofar as
a.) it may be seen from the journal that there is much demand for Individualism in certain English circles,
b.) that there are very few persons in England able to satisfy this demand.
The editors should read the "Individualist", so that they may come to know what real individualism means. Obviously, they don't.
5.) "The Free Trader" of May-June 1950.