MeulenBthSection four
9. 12. 1950. Your letter of 23. 11. 50.
Dear Mr. Meulen,
when I read the excellent article "Humpty Dumpsky" in "The Economist" of 11.11.50., I remembered your remarks under the heading "socialism", page 2 of your letter. You say: "… notice how quickly the process is occurring in Russia today" … " and really, all words concerning political economy or political science must now be used in the sense prescribed by the Russian government and now fixed in the new dictionary of Liokhin and Pestrov.("- ? - J.Z.)
(Must they? Who bothered to read Soviet-Russian economics texts and about their propagandist interpretations? - J.Z., 21.3.03.)
But from this fact (? - J.Z.) I do not derive:
1.) that the Russian government had a right to deform the Russian language (which Turgénieff called the great
consolation of his life) as it did,
2.) that the deformations are used by the Russian people if they talk entre eux,
3.) that these deformations will be continued one day, if there will be a real revolution in Russia.
I think that an intelligent Russian now speaks two languages,
a.) the prescribed and
b.) the normal, created before 1917 by the Russian scientists, poets, etc. The fact that the latter is not spoken in public does not annul the other fact that it exists and is used.
When in Germany, in the year 1878, firstly by the socialist Hoedel and, a short time later, by the socialist Nobiling (both sympathising with anarchism), shots were fired at the emperor William I, the word "socialism" was used, by official papers, by members of parliament, by government officials etc., as a synonym for murder, robbery, etc. But the German scientists were not in the least impressed. Also, when Bismarck in a then celebrated speech at the Reichstag remembered the burning of Paris by the Commune, in May 1871, and stated, that he had seen the smoke and smelled it and that since that day he knew, from his own experience, what socialism is, for - - he said - - he had seen it, and now all officials used still more so the word "socialism" as a synonym of arson and murder, the German scientists (all non-socialists, with few exceptions) continued to use the old word in its former meaning. At last their terminology won. Bismarck himself, when conservatives reproached him for his "Sozialversicherungspolitik", as being merely socialism (in the 80's) answered: I do not fear a word, style it as you like! So the word "socialism" was used in Germany exactly in the same meaning in which Benjamin R. Tucker used it, and that until about 1914.
During and after the first world war, the word "socialism" was understood as "state socialism". One of the reasons was, that the other socialist groups had disappeared, some - - like the anarchist group - - simply by imprisoning the members or killing them. But my impression is that the old meaning of the word in Germany is not yet quite forgotten. I myself do not intend to yield to the ignorance or the illogical thinking of the German article writers and book makers, a great part of them being government officials, who dare not to use another language than their ignorant superiors. (Many of them are not masters of the German language and their opinion on this point does not carry weight.)
In all spheres, where now the word "socialism" is used as a synonym for State socialism or State capitalism, there does not longer exist a word for a movement whose aim it is to reduce the exploitation of men by men to the technically possible minimum, where the means to be applied are to be expressed by an attribute to "socialism". The consequence is, that also the notion of such an aim has been quite lost, for the existence of a notion depends - - for average people - - upon the existence of a word, which indicates this notion.
By what word would you now express a movement with the aim to abolish, as far as possible the exploiting of man by man, by other means than State socialism or State-capitalism? You have none, although the work of your life is devoted to such an aim.
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Duration of bank loans. You say: "If it (the bank) confines itself to unusually short-date loans, it will lose profit".
a.) "unusually short-date loans". For decades the normal duration of loans granted by a note-issuing bank in notes has been the time of transportation of an existing good, from the place where the good was manufactured or stored to the place where it was expected to be consumed and paid by the last hand which took over the goods.
In general - - and here you are right - - the profit of such a business is not great. W. B. Greene, who knew note- business from the several thousands of note-bank in the USA, therefore - - quite logically - - proposed to do the note-issuing business by non-profit-making cooperatives. He went so far for the reasons we often discussed. I might add to these reasons that a note-issuing banker has always an opportunity to provide other services to his customers than the issuing of notes and that these other services are of the greatest profit for the customers, for the society as a whole and that they also leave a good profit to the banker.
An example for our time would be the financing, of wind-motors in agriculture, to the same extent as this is done in the USA. There the peasants are much more independent from coal than in Europe and, especially, in Germany. The financing cannot simply be done by handing over notes to the amount of the price of a wind-motor and saying to the customer: return me the notes within 15 years! I explained in my books the only possible way in which a note issuing bank may involve itself in the financing of long term investments.
b.) I now, that you consider the time elapsing between the beginning of the transport mentioned above, and the end of this transport, as unusually short. At least it is not unusual, for it was normal even for the great monopoly-banks such as the Reichsbank.
I know, too, that you do not acknowledge the distinction of exchange
I.) of present goods against other present goods by means of transportation (and exchange media issued only for this purpose! - J.Z.)
(J.Z.: Somewhere else B. pointed out that Swedes originally had for such notes the suitable name: "transport tickets". Such notes are turn-over credit or clearing notes, or "cut-up" sound commercial bills, in convenient denominations, circulating only until these bills are due. - J.Z., 21.3.03.)
II.) of present goods for future goods still to be produced,
as essential.
(J.Z.: "Notes" representing the future goods are medium or long-term investment certificates, bonds, shares or other securities. They are acquired with spare current goods and services or savings, invested for longer terms and, ultimately, repaid out of future goods and services produced or offered then. While one can buy shares with cash and often sell them rapidly for cash, they are not cash. Nor are genuine banknotes merely shares in productive capital and future earnings. They can be immediately turned into goods and services or used for debt payment and therefore they are called "currency". Share certificates, bonds and mortgage letters are not currency and cannot be used as currency even if they are called banknotes, printed like banknotes and issued under the assumption that they are banknotes. They do not have a corresponding and immediate readiness to accept them for goods and services. Why should the current goods and service providers accept them, when they have not issued them themselves, are not contractually obliged to accept them and do not want to invest their goods and services or sales proceeds from them, on long terms, in such securities? It takes two to tango! An issuer and an acceptor. In the absence of legal tender such "banknotes" would be widely refused and suffer a large discount as currency, among the few remaining acceptors, no matter how profitable they might be as long-term investments. People who think only in terms of forced value and forced acceptance do not consider this freedom alternative and its consequence. - Even tax foundation money suffers a discount when issued beyond the near-future tax receipts. So does railway money or bus money, when issued beyond its near future reflux in fares. - Current mutual sexual satisfaction is different from the promise of sexual intercourse many months or years in the future. Notes and securities are as different. - J.Z., 21.3.03.)
Many economists are of your opinion. Few of mine. Experience, made under conditions where cours forcé does not prevail, will teach both groups.
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Financing in old times, say, in the years before 1844, is not yet fully explained. Example: When Marx tried to get examples of how the purchase of machines was financed by employers, he could not get any information. But there still exists a letter of Marx to Engels (owner of a great textile factory) in which he begged his friend to inform him and to tell him at what intervals his machines were written off. The literature of that time did not furnish sufficient information. Engels' answer is not preserved. I am convinced that the purchase of machines was not financed in the simple way of handing over notes to the manufacturer, to the amount of the price of the machine and saying to the manufacturer: Repay the notes in 60 monthly intervals or so (with interest - - high or low).
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Very faithfully Yours - signed: U. v. Beckerath.
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Dear Mr. Meulen, 10. 12. 1950.
in itself the fact is of no great importance, but as a symptom it is. You will have read in your papers that now the great furnace at Watenstedt, Germany, will be dismantled by the decision of the British authority. The Greek government shall get the debris as reparation goods. I am convinced, the officials of that "State" (remember the reports on the Greek concentration camps in "The Word") sold this debris already as scrap-iron to an English concern. But that's not so important. Important is that:
Certainly, at the moment an increase in the production of iron is more desirable than any other things That the English government distrusts German workers and refuses to hand over to them the high furnace of Watenstedt, I can understand, although I think that such a distrust is today no longer justified. But here opinions may differ. What is not to be understood (or too well understood) is, that the British government did not send for English workers or other non-German worker, whom it trusts, so that these furnaces might again produce iron, as much as possible and as soon as possible.
The expression of thoughts may be prohibited, but the thoughts themselves cannot be prohibited and, unavoidably, these thoughts, in the minds of Germans, must be:
If the British government really had the intention to protect the Eastern frontier of Germany, then it would do all in its power to produce iron for the army that shall be ranged at the frontier. If it stops iron production or dismantles high furnaces, then, quite obviously, it has not the intention to protect the German frontier.
The Germans themselves, at the moment, cannot do it. Against a Russian army of more than 2 000 000 and excellently armed soldiers, with an abundance of tanks and planes, the Germans are defenceless, whether there are 100 000 German soldiers merely armed with rifles and a few cartridges or 200 000 or 250 000, numbers which were discussed in the last weeks in England. Also, in this connection, the Germans cannot possibly forget the very numerous cases where people were detected in England, who were bribed by the Russians or doing unpaid services for them or defecting to Russia. It is clear that for each case detected there must be about 1,000 or so people not detected.
(There might be as many more collaborators than the discovered ones, but I highly doubt it. Sometimes B. seemed to used "poetic licence" in his letters or simply exaggerated to make a point. - J.Z., 21.3.03.)
Is the dismantling of the high furnace of Watenstedt such a case? (I tell here only what unavoidably must be the thoughts of the Germans, but assert nothing.) What is the matter with those who now decide England's and the world's fate?
In Korea, at the beginning of the war, the American army was practically without ammunition. (Ammunition for 2 days!!) The intelligence service of the Americans did not discover, that a few miles from them an army of a million Chinese troops was marching against the Americans. Atom bomb secrets are handed over to Russians. (They certainly, are no secrets any more, in all details.) Has fighting any value in such a situation? The war, although not yet declared, is practically already lost.
The situation reminds me of the situation in the USA before the Civil War in 1861. The war minister at that time was a Southerner. He sent the fleet, all ammunition and as much artillery as possible to the South. When the war began, the North was almost unarmed. (B. wrote: "quite" unarmed! - J.Z.)
Is the administration of England and of America "divided" as the administration of the USA was in 1861???????
Very faithfully Yours - signed: U. v. Beckerath.
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Dear Mr. Meulen, 11.12.1950.
Gold coins again: The individualist monetary system - - at the moment defended in the whole world by a dozen men or less - - says: a monetary system should contribute as much as technically possible to the economic, social and political independence of the citizens.
All other systems say: a monetary system should contribute as much as possible to strengthen the government's power and to facilitate planning of production, of consumption and all other functions of government today considered as necessary or desirable.
Individualists agree that possible abuses of an unlimited right to issue notes are most effectively prevented by an unlimited right to refuse the acceptance of notes. That issue and refusal are to be limited, too, by that what the German law calls "Treu und Glauben im Verkehr" and "Gute Verkehrssitte" is self-evident. (Honesty and faith in trading & good commercial customs. - J.Z.)
The question is: Does an unlimited right of issue suffice to guarantee the highest degree of economic, social and political independence? Although I cannot exactly prove it, I assert: No! But I appeal to your knowledge of business, of men and of monetary history.
Let us consider business conditions among populations like, say, in Tennessee and suppose that there would be permitted an unlimited issue as well as the absence of cours forcé in all forms.
(The obligation of an issuer to accept at par the money, which he had issued, cannot be considered as a form of cours forcé.)
Suetonius reported that Nero coined silver so that he made many more sesterzes out of a pound of fine silver than his predecessors. But he ordered, that these new coins were not to be accepted by the tax collectors, and that taxes must be paid in old the old coins. There are also examples of later governments which proceeded in the same way or issued notes and did not accept them at par from the taxpayers. That cannot be defended by saying: The government used the common right not to acknowledge any cours forcé!
(J.Z.: For the same reason that you cannot discount your own IOU's, when someone pays you with them, but must, instead, accept them at their par value. Everything else would be obvious fraud. - J.Z., 21.3.03.)
Now you know that the people of Tennessee are as pious as any in the world. You know, too, the laws of that State whereby Darwin, Herbert Spencer and similar revolutionaries are strictly prohibited at schools, universities, etc. of that glorious State. Let us suppose, that in a small town of Tennessee there lives an agnostic and one
who possesses courage enough to publicly confess his opinions. From reports of travellers we know what that would mean. The role of the agnostic would not be any better than that of a Jew in Nazi Germany.
(J.Z.: Well, at least he could migrate to a more tolerant US State. - J.Z., 2.6.03.)
Do you believe that the agnostic will find a banker who grants him loans? The banker would tell the agnostic: If I would grant you a loan, then all my customers would stop all business with me. I would be ruined. And the banker would tell the truth. W. B. Greene's monetary cooperatives would not help here. As you quite rightly pointed out, such cooperatives would, probably, be at least as tyrannical as a banker would be.
In such a situation an individual should have the possibility to procure for himself gold coins (or silver coins) and pay with them. There, where such coins circulate, that is - - practically - - no great problem, except in times of a crisis.
I represented here a very extreme case, but certainly not an impossible one. You know yourself of simpler cases, where a man, quite trustworthy from your own standpoint, was not trustworthy from the standpoint of his contemporaries. But his case was tolerable, because he had the possibility to pay with coins.
Very faithfully Yours - signed: U. v. Beckerath.
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15. 12. 1950. Your letter of 12.12., received today.
Dear Mr. Meulen,
quinine. Your son-in-law is insofar excused as, really, quinine for decades was generally used in the whole world, as a proven means to regulate digestion, also to appease disturbed nerves. From experiences of persons I know, I saw how seldom physicians take into consideration what in German is called the "Nebenwirkung". (My dictionaries do not translate the word. "Nebenwirkung" [side-effect, J.Z.] is an effect beside the intended effect and not always foreseen.)
One shall not give advice and if I give you, nevertheless, the advice to come again, next spring, to Germany (supposing she still exists next sprint) to visit your physician at Frankfurt am Main, you will say: The old fox, of course, means that I will visit him again at Berlin. I must confess, that you are right. Lecture at the British Information Centre!
Payments abroad. In the case we discuss, the American (or the person to whom the American sold the pound note) must buy English goods for the amount of one pound, and every day delay costs him interest, whether he like to buy something or not.
After the imported goods are paid, the possessor of the English notes are no longer free to reduce their purchases from England.
Decisive is that: Whenever owners of commodities are as hard pressed to sell the commodities, as Americans were in the years 1946-1950, they take as means of payment what the buyer offers and certainly do not insist on dollars, although - - of course - - they prefer dollars. (At the conditions prevailing in these years. If the American government performs the announced inflation - - the word taken in the sense of 1913 - - the Americans will beg the English not to pay in dollars, but in pounds or anything else.)
Consider also this: In the previous centuries every creditor had the right to demand gold coins (or silver coins). This right of creditors was one of the essential details of the "gold standard", the latter word taken in the sense of 1913. It is strange that this right, as an essential detail of the old gold standard (or silver-standard) escaped the attention of all economists, except - - it seems - - W. B. Greene.
The effect of this right of creditors could be, that a country might be deprived of its stock of precious metal. Coins are not endowed with the tendency to return to the spot where they are manufactured.
(J.Z.: In the medium and long run the go or return only to the country in which they are most highly valued. - J.Z., 21.3.03.)
But if the said right of creditors is abolished and the creditors must take notes or clearinghouse certificates, all is fundamentally changed and conditions are established not comparable to any previous conditions in economic history. (Except Persia, of which I will not write here.)
Every note or certificate, etc. is endowed with the tendency to return to the person or concern who issued it.
Once people become aware of this great change in monetary conditions and the "portée" of it, they will also become aware that import and export are now on a quite other basis than they were before. While imports and exports are still performed by the means of an "exclusive currency"- - at the moment the dollar - - it is either by prescriptions of ignorant governments or by the no lesser ignorance of average merchants.
What average merchants are like, may be seen from Jevons' amusing report about the resistance of English merchants against clearing, decades after the London Clearing-House was opened. (See: Jevons, "Money".)
The right of creditors to demand gold coins is a much more essential detail of the (old - J.Z.) gold standard than the right of note holders to get the notes redeemed in gold coins, on demand, or with the delay fixed in an option clause.
This right was until now not acknowledged, by economists or monetary theorists, as an essential detail of the gold standard, because this right is established not in the monetary laws but in the civil laws, where an average economist does not seek them. But the German Civil Law of 1900 did not grant creditors the right to demand in all cases gold coins. It only said that agreements must be fulfilled as good faith and customary kinds of payment demand.
Par. 242 of the "Buergerliches Gesetzbuch":
"Der Schuldner ist verpflichtet, die Leistung so zu bewirken, wie Treu und Glauben mit Ruecksicht auf die
Verkehrssitte es erfordern." (The debtor is obliged to effect his payment in a way as trust and faith, with regard
to commercial customs do require. - J.Z.)
The immense progress here established was quite overlooked at the conferences of bankers convoked by the Reichsbank in the year 1908. Experts as well as university-economists took it as self-evident that all creditors were entitled to demand gold coins if they liked them.
The question arose, whether workers as well were entitled to demand gold coins for their wages. It aroused very much attention. An economist like Adolf Wagner said: Of course, they are. Very probably the answer of Adolf Wagner contributed to the decision taken, to increase the issue of small denomination notes and not to repeal the cours forcé for silver thalers. (Later they were replaced by other silver coins, which were endowed with cours forcé up to an amount of 40 Reichsmark per payment.)
Gold standard. A few days ago, I had something to do in the vicinity of the British Information Centre and used the opportunity to reread the article "gold standard" in the latest edition of the Encyclopaedia Britannica by Prof. Graham, Princeton University. I do not agree with Graham. (He, too, overlooked the right of creditors to demand gold coins as an essential detail of the gold standard.) But I saw from the article that Kitson's terminology is by no means the general one. Graham's definition is different from that of Kitson, and much resembles the definition in use before 1914.
The redemption of notes on demand is one detail and may be absent, although the gold standard (the word taken in the sense of 1913) still is the currency standard.
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Value. England's currency before 1913 were gold coins. They never suffered a depreciation, also not - as far as I know - - notes of the Bank of England. When England, before 1913, lost sometimes many gold coins by her external trade, the main difference was another one than a depreciation (existing or foreseen) of the legal currency.
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Purchase of gold. I refer to my letter of the 19th of May 1950, where I spoke of Jevons' experiences with coining gold ingots.
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Free Banking.
a) To promise redeeming the notes in gold at the market price of the gold, expressed in the notes to be redeemed, or to send the owner of the notes to the market and tell them: "Purchase yourself the gold", that's, economically, the same thing.
Technically no other kind of redemption is possible than by handing out standardised ingots, and such ingots are coins, whether they are privately manufactured or by the government's mint.
b) I cannot share the tacit supposition that notes of well known banks always will be fit as a means for redemption. In a case of a run, such banks will probably be more exposed or at least as well exposed to the run than are smaller banks.
c) I still do not yet see a reason for why merchants will not price their commodities in the shops in terms (multiples or fractions) of gold coins, if such coins are permitted to be manufactured and to circulate.
Not trust (the word used in the sense in which bankers used it in 1843) but continual distrust in the future, in politicians, in parliaments, in governments and (since so many people are now strong believers in astrology) in the stars, will be the basis of the note issuing business of the future.
All details of the old note issuing business will be changed by this circumstance and some others.
In the old days, the obligation to redeem notes was essential and note issuers themselves considered it as essential. The intention of the option clause had not the effect to enable bankers to issue notes without a stock of precious metal as cover. The question was only: In what proportion should the cover be taken in relation to circulating notes.
I can understand that your standpoint is: Even if all this is true - - I will, nevertheless, keep from the old system as many details as possible. A state of affairs, where the obligation to redeem (not at par but at the terms you proposed) is discarded, does not interest me.
Well - - but for Germany and many other countries only such note issuing business is technically possible (at least for the years after restoring liberty in the economy) where no obligation for metallic redemption exists in any form, but where a free bullion market exists. Russia, India and China are in the same condition as Germany. That is the reason for which I am first of all interested in the conditions of a note issuing business not restricted by any obligation to redeem notes, may it be at parity or not.
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Foreign interference in internal affairs. While we discuss the matter, Mao - - are really great statesman, although cruel and probably gifted with other gifts necessary for great statesmen, such as Peter I and such people displayed - - solved the problem. The army now fighting against the West is an army of volunteers. Also the armies now fighting in Vietnam etc. are armies of volunteers. That many of the volunteers do not fight quite voluntarily and - - most important - - have not the right to retire from the army, is a matter which Asians will certainly still discuss. Europeans and Americans, obviously, lost the capacity to talk reasonably about such things.
If there is a future for mankind, volunteers from the whole world will interfere - if the rights of man and citizen are violated in any part of the world.
The acts of anarchists in the 19th century - - although committed on false suppositions - - show that volunteers fight for that what the individual understands by liberty. (Until now individuals erred here.) But this is not beyond the limits of the human mind.
Also the fact of the Kamikaze-pilots of Japan showed that self-preservation is by far not always the guiding principle of human conduct.
Such are all the first beginnings of a new age. (If there will be a new age.) We have here to do with facts and not with hypotheses without facts.
Salazar - - he does not seem to be a tyrant and until now I head nothing of Portuguese concentration camps. Volunteers will hardly fight against Salazar, not because they do endorse his system (few will endorse it), but because they say: It's not worthwhile. There are other people to be removed, people of more importance.
India. Certainly, there exists now a law by which an Indian can (or should have the possibility) to vote if a party presents him with a candidate. If the candidate wins and proves to be a good man, the Indian was a wise voter and justified the system. If the candidate becomes a Hitler (something that he will not reveal before he is in power), the voter is much to blame for his country's misfortunes. What is there to say against such reasons???????
But I cannot discover in this state of affairs anything that deserves the term independence. You can?????
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Russia & Success of Chinese armies in Korea. A pious Jew would answer: Your word in God's ear!! You know my opinion about the military strength of Russia. Regarding the successes of the Chinese armies, I think that the mountains of Korea are the least circumstance that favoured the Chinese.
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Deutsche Partei. You are right. The credit program of the DP shows that the people had at least the idea that there exists also a credit problem. If the DP would work out the idea and express it in clear words, it could win the next election, however small the party is at the moment. Probably the DP means the system by which the Nazis promised to provide employment for the unemployed. The Nazis, in 1932 and 1933 were prudent enough not to give details. Details frighten away voters of the kind to which the Nazis appealed. But the general impression was: The Nazis really possess a means not yet detected by others. Therefore (not for their antisemitism) so many millions voted for Hitler.
It world be interesting to reconstruct the promises of the Nazis in the years 1932 and 1933. But the whole and immense literature was destroyed by the Allies in the year 1945. Everyone was obliged to deliver all literature of Nazi origin. The effect is, that many people in Germany still believe: Hitler and his economics staff really possessed the device to create employment, and if it would not have been so good and so effective, the Allies would not have insisted upon destroying the whole literature. I think that among those youths, who never read Nazi literature, this opinion is still widespread.
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Believing that Hitler saw the disadvantages of a gold standard - - the latter word used as in our discussions - - would be very much over-estimating Hitler and his Staff. The opinion of leading Nazis was: The use of gold for monetary purposes is a Jewish invention. That should be sufficient to prohibit the use of gold coins.
Very wide-spread was also this opinion, although it was hardly expressed in literature:
In America there exists an immense stock of gold. The Jews possess this gold. From the gold they get, as interest, the greatest part of the world's production - A secret Jewish king in the USA organises that.
I asked a Nazi, how that would be possible: To store the gold (that is: not lending it out) and, nevertheless, get interest from a store of gold. He answered: that is a great secret. The party should catch a prominent Jew and torture him until we would, at last, reveal the secret.
Silliness may become a political power as well as high intelligence. (Crusades, and similar "movements", which the Malthusians now try to explain by lack of food in Europe.
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Social order. Agreed.
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Mixed marriages. I congratulate Mr. Churchill. He had very much good luck. I know Germans whose experiences were of a very different kind.
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Malthusians, Pacifists. Since both do not see that the West's under-population created the present danger of war, they resemble the pre-diluvian animals who, certainly, died out because nature implanted in them false opinions about the real conditions of their lives. In future museums their skeletons will be placed beside those of the Ichthyosaurs and similar blunders of nature.
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Yesterday I got a "Zentner"(= 50 Kilos) of coal!!!
Very faithfully Yours - signed: U. v. Beckerath.
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29. 12. 1950. Your letter of 26. 12. 50., received today.
Dear Mr. Meulen,
(I wish - ? - illegible! - J.Z.) a happy New Year to you, too! With pleasure I learn that your health is still improving and that you are now able to eat things of which the doctors disapprove. If one is as old as we are and has got so much experience, one may say: to each such things and not only rarely, is the very best diet.
My Christmas was nice and my friends gave me much cake. So much, that yesterday I bought some collared (? - J.Z.) herrings and black rye bread to get a change.
A chicken in London = 7 s 6d!!! In my nest letter I hope to write to you what it costs in Berlin; I know it is much cheaper. Within a week or so, London could get the same chicken prices as Berlin, if London would at once introduce a free market for chickens, chicken forage, etc. That competition brings the prices down to the economically possible minimum and, at the same time, supplies the people fully, much better than an army of price controllers and the best organised nourishment offices, that we saw in Berlin and see it daily.
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In my chamber: 6 degrees Celsius = 48.8 degrees Fahrenheit. If it remains so, I am content. (On the street: = minus 7 degrees Celsius = 19.4 degrees Fahrenheit.) The papers predict that in 1 1/2 weeks or so it will be warmer in Berlin.
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Socialism - Individualism. If you would call yourself an anti-capitalist Individualist, it would be distinct, I think. Certainly, you have the right to call yourself an anti-capitalist. The work of your life has been to create the possibility to get capital for non-capitalists and to break the monopoly of the class now called capitalistic. If one would introduce into economic terminology the words "Tuckerian socialism" it would be a good thing. I think is impossible - - at the present state of things - - to express by one word exactly the "Richtung" (tendency - J.Z.) to which one belongs. Two words at least are necessary.
If you would not have changed the title of your book from "Industrial Justice by Banking Reform" into "Free Banking", you would, perhaps, have become the creator of "Banking Socialism". Rittershausen and I have stated several times that we agree that "Bank Socialism" would not be a bad word for what we want.
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Annales d'Economie collective. I published two books on unemployment, the one in the volume you cited. ("The Practical Realisation of the Milhaud Proposals", 1934, and in the following year: "Does the Provision of Employment Necessitate Money Expenditure?". A third book: "Public Insurance and Compensation money", 1938, offers a further application of the principles at first established by Milhaud. Rittershausen wrote on his copy of "Public Insurance etc.": Camouflage title and was quite right. I think, Williams & Norgate, Great Russell Street, still possess copies, if their shop has not been destroyed.
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Long term loans. (Exchange for future goods against present goods.) Our difference may be - - I think - - stated in a few lines:
1.) I say: Long term loans should be financed by bonds, interest-bearing, but the purchase of the bonds should be made so easy as economically possible by a note-issuing bank. The loans granted for that purpose -
(J.Z.: i.e., the purchase of the bonds. E.g., the loans could be subscribed with short-term shop foundation money, earned in the usual way, by the sale of goods and services for them. - The term "loan" is here misleading. The bank does not lend the subscriber the short-term private money issued by it, to enable him to buy the long term bonds. But it makes its short-term goods-warrants etc., also available to him, for such subscriptions. He will have to earn that private money and be willing to so invest these earnings. He may offer a certain fraction of his total goods and service offer for this purpose and oblige himself to accept the free bank notes for it and to deliver them as his long-term loan subscription to the issuing bank. Upon this obligation by him, the free bank can issue an additional amount of "shop foundation" notes, corresponding to his readiness and obligation to accept and use them for this purpose. It sounds complicated but is, in essence, the same process as a loan subscription with State paper money - but makes the investor independent of the availability of State paper money. On repayment of the loan, this process is reversed. The loan is then repaid with then issued goods and service warrants, for which the long-term loan debtor has then to make his goods or services available. - For more details see his books & other writings. His "short-hand" expressions were clear to him, and, possibly, Henry Meulen, but, probably, not to all other readers. - J.Z., 21.3.03.),
- can be short-dated. The note-issuing bank is necessary to enable investors to buy the bonds even in times when "normal money" has disappeared.
2.) You say: Long-term loans can be granted by a note-issuing bank without the detour of bonds and interest.
I do not give up the hope that, one day, we will here come to fully agree.
The majority of note-issue theorists is on my side. (But both of us do not trust in majorities.)
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I do hope that you have in London the possibility to get Scratchley's economics books, including his dissertaion on "Local Enterprise Societies". I had this book. Burnt. A. Scratchley was a famous mathematician and is the theorist of modern "Building Societies".
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Gold coins. I do think that you underestimate the power of gold coins. All theologians complain - - quite justly - - that their god, in nearly all cases, cedes if gold coins are in competition. I personally think, that the future religion
will be partly founded on gold coins. Constantine - - one of the greatest rascals, but also great as statesman and reformer, created a very good gold coin system nearly at the same time that he declared Christianity as the State religion. So he connected, in the minds of his subjects, the two notions of
a) honest money,
b) new religion,
both imperial characteristics, and the subjects said:
That the money is good we see every day, although we do not conceive how it is connected with the emperor's religion. Let us, provisionally, accept both.
Without the connection of 1.) religion and 2.) good gold coins, the new religion would have remained a belief like the religion introduced by Elagabalus and would have been long forgotten.
You will posses books in which the pre-Constantine money-system is described. From the chapters concerned
with it, one may learn what a good reform Constantine performed in the monetary sphere.
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Are you quite sure that a note-issuing banker in such a pious country as old Scotland would have granted loans to an atheist?????
You are right: The atheist can get gold coins in a priest-ridden country only by selling goods or services. But that he can is important.
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In the years 1923 and 1924 there was established, by nationalists, a note-bank in Pomerania, which issued rye-notes. (Gold was then already considered as a Jewish invention by 100 % nationalists.) On these notes was printed:
"This note loses its value in the hands of a Jew!"
The effect was not quite the expected. Nobody accepted the notes, because he did not know, whether a Jew had formerly possessed the notes and the bank had forgotten to add: "but the note becomes valid again, if a German accepts it." All that is impossible (practically) with gold coins.
In our time no act of monetary craziness or fanaticism can be considered as impossible. In Germany not and in many other countries.
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I do hope that you got my letter on Strasser.
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A friend of mine knows personally the author of one of the numerous proposals, made 1947, for monetary reform in Germany. He gave me the book and begged me to review it. I did and added some general remarks, including an imperfect sketch of the individual's monetary rights. I invite you to publish a better sketch in the next issue of the "Individualist". It will be the first printed collection of man's monetary rights. I enclose here my own sketch. Some items are to be found in my proposals to Korean monetary revolutionaries.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
2. I. 1951. Your letter of 31.12.50., received today.
Dear Mr. Meulen,
Otto Strasser cannot be considered as an associate of Hitler. He was one of his most dangerous enemies. If one considers, too, that he is a single man, without connections of importance, also, obviously, without the qualities of a great party leader, one must say that it would not be worthy of so great powers as England, Canada or the USA to fear him. They should let him return and that, first of all, because the formal right is on his side: The par. 13 of the rights of man. (UN declaration of them. - J.Z.)
Italian elections. No - - the fact that Fascist votes increased did escape my attention. Probably, the Allies did the same as they did in Germany and prohibited all kinds of literature, considered by them as Fascist. Would they not have done so in Germany, the literature would still exist and daily arouse new concempt for a movement based on such crazy arguments. In Italy, probably, the same would be the case. Destroying the Fascist literature is clearly the way to a new Fascist movement.
Payments abroad. Most of what you say is quite right, but it is not the main point of the question.
1.) You say: "The dollar shortage in Europe means simply that Europe is importing more from the USA than she exports."
Better than I could do it: Adam Smith, David Hume and many other Free Traders pointed out that such a thing as "the country imports more than it exports" cannot exist. If statistics (commercial statistics always to be accepted with great and for many decades well deserved distrust - - believe an old statistician) seem to indicate a considerable difference, it is to be expected that many commodities were bought on long-term credit, that's all. This agreed, the "dollar shortage" cannot mean that Europe is importing more from the US than she exports.
2.) Really, the term "dollar shortage" is by all governments, the English included, interpreted in a different manner than you interpret it. Governments, backed by the professors paid by the governments, say: That we must export before we can import, that's self-evident. But exporting is difficult. The difficulty causes a shortage of dollars which would at once disappear when the difficulties of export would disappear.
3.) If it is true, what the English government says (and I believe it to be true), then it is not quite so as one may derive from the passage in your letter and the situation is to be judged in a different way.
"Our banks keep a store of dollars, …" - The government says: Well - - the banks do keep a store of dollars, but this store is by far not enough to meet the demands of importers. And really: that's the point.
(J.Z.: Why should the banks keep a store of dollars sufficient to satisfy the demands of importers? If importers want dollars, in the belief that they really needed them, then they should buy them, on an English or US Exchange. To supply with any foreign currency, i.e., the foreign exchange money market, is not necessarily the business of the banks or an important business for them. Moreover, at the free market price, or freely floating exchange rate, always enough dollars could be bought. Naturally, if many dollars are wanted than usual, and they are paid for with pounds, while pounds are not in great demand on the money market, then the value of the pound in relation to the dollar would fall. The very fall of the pounds exchange rate would make the pound again attractive to buyers of pounds. - J.Z., 22.3.03.)
4.) If the government's assertion is true (and it is true), that the dollar-store kept by the banks is quite insufficient for the needed imports, then it is right if a non-believer in the present system says: Dollars are not at hand, but pounds are always at had as a means of payment for imports to England. And that's the point which is decisive.
I assert: If the country which must import, is in the position to wait one hour longer than the country which must export, then the country, which must export, will accept, with all the readiness desired, every means of payment,
ice from Eskimos and promises from anywhere. The necessity us all possible means to provide employment - - for which exporting has always been considered as one of the most effective - - is to the same degree more pressing than importing, as the secretion part of our metabolism (Stoffwechsel) is more pressing than the intake: eating. But in times of war this observation - - of course - - does not always apply.
In times of peace the buyer largely prescribes or is able to prescribe the means of payment; in times of war the seller prescribes it.
Value. You say: "Before 1913 our gold coins never suffered depreciation simply because the Mint was legally compelled to buy all gold offered to it at a fixed paper price."
Indeed, thus this matter is now generally understood in science and by non-scientific people, but:
1.) gold coins could not depreciate because gold coins themselves were the legal measure of value (not only in England),
2.) if a Mint is ready to coin offered ingots and leaves the one, who brings the ingots to the Mint, for his convenience, the choice to accept coins for his ingots or paper money (in practice the Mint will have offered a cheque), then it does not correspond to legal side of the transaction to style it a purchase of gold ingots by the Mint, although the commercial effect for the ingot owner is that of selling the ingot.
The general use of language proves nothing here. That the common usage of the English language does not correspond to the real legal proceedings was stated by Jevons, and the manner in which he stated it is worthwhile to be read in his paper. (As far as I know, reprinted in his "Investigations in Currency and Finance".
All this is not "hair-splitting", at least not in a discussion on the standard of value.
The opinion, so wide-spread in the world at the present time, an in the Anglo-Saxon countries most, that paper money is the natural measure of value, that it is also the natural measure for gold, this erroneous opinion is closely connected with the opinion, that also before 1914 the Mints of the world and that of England especially, bought the gold for paper money, so as they do now. (Now the legal situation is toto genere different.)
The more far-going opinion, that gold coins au fond are a superfluous and even useless instrument of trade and unfit to measure values, is also closely connected with the opinions indirectly expressed in our above quoted sentence.
By a natural measure of value I understand (with all scientists before 1914), that measure of value which businessmen use, when they are free to choose it, as the best one known to them. Until after the Napoleonic wars, gold was obviously the best in a great part of the world.
If the laws in the whole world would not forbid the use of gold as a measure of value in commerce, e.g., to price commodities in the shops in gold, within less than a year gold would again be used as it was used in the year 1913.
Natural measures are not always the best possible ones. Admitted. The measure of value invented by you and represented in your book offers advantages.
You know the numerous other measures of value proposed by scientists, say, to compare values for historical purposes (e.g. in old Egypt and in our times) or even for commercial purposes in our time.
They may be superior to natural measures of value in many respects, but most of them require:
a.) a calculation, not free from individually chosen methods, such as the index-number measures,
b) determinations of another kind than calculations, but also chosen by individuals, subject to errors and seldom in harmony with other individuals, who are likewise appointed to make decisions like those here in question and who feel themselves to be competent. Such are the measures of value used or proposed by adherents of the Keynesian theories.
I prefer a measure of value free from individual decisions.
I assert that until now gold - - as imperfect as it may be - - has proven to be better than all artificial measures of value.
I claim for all men, who prefer gold, the right to use it and I know that I claim this right for more than 9/10 of all men.
The right of others, who prefer other measures of value, should not be violated by adherents of gold.
Such ideas are more easily expressed in the German language than in English. The German word "Goldwaehrung" - - like the French "Etalon d'or" - - still expresses what the word "gold standard" expressed in England in the 18th century. Now, for most Englishmen, the world "gold standard" expresses merely one detail of what formerly was a gold standard, namely, the obligation of an issuing bank to redeem its notes at par upon demand.
For a monetary situation, where all commodities are priced in gold coins, the English have no longer a noun, while Germans and French have it.
Was it progress, when about 1914 the "jacks in office" began to use the world "gold standard" in its present sense and to proscribe its former sense? (J.Z.: They outlawed the free use of gold rather than merely the improper use of it. - J.Z., 18.6.03.)
Let me add here, that about 100 years ago in England, as well as in Germany, the possibility was discussed of a paper money not redeemable in gold or silver coins but accepted at its face value for taxes etc. (Greene mentions such a paper money. In Germany it was widely used, and invented in Saxony in the 18th century. the first idea seems to have been conceived by the manager of a bond-issuing mortgage bank in America in the 18th century.)
But at that time nobody pretended that the country was no longer on a gold standard when such a paper money was introduced. All scientists and all businessmen at that time thought, that for a gold standard the pricing of commodities in gold coins was the most essential detail and for a silver standard the pricing in silver coins. Thus has the language changed!! (In England.)
Now you may see, too, for what reasons I insist on gold coins and on the right of individuals to manufacture gold ingots in the shape of gold coins if there are no State Mints or if they do not provide this service.
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Gold in USA. You ask: What makes you think that the store of gold in Fort Knox is owned by Jews?"
I hope, by the world you are here meant some of my countrymen and not I. And what made them think so??? For a similar reason they thought so for which all oxen of a herd bray if one ox begins. One antisemite may have believed it himself or may have invented it: the nonsense was quite corresponding to the general antisemitic mentality and, therefore, believed by many thousands. Certainly, among the followers of Mosley there are still numerous people who believe it as well.
Chicken price. (Your letter of 26. 12. 50.) I begged my neighbour, Miss Trampe, who greets you heartily (you will remember her), to look for chicken prices at the shops. She reported to me that in Germany a pound of chicken (500 grams) now costs 2,60 West marks. For an English pound (453 grams) that would be 2.34 West marks. The present quotation of a pound note at Hamburg is DM 13.50, or 1 shilling is worth DM 0.675.
So one pound avoir dupois of chicken would be worth 1.56 Shillings. The 3-pound average chicken you ate would have cost 4.68 Shillings. - Yesterday I heard from a lady that some months ago a chicken was priced in Berlin at 2 marks per German pound. (500 g.)
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Free Banking. Is it your opinion that a system of note-issuing banks, founded on a general and not restricted right for every individual, to issue notes, does no longer deserve the name "Free Banking", if a considerable number of these banks declare: We do no longer redeem our notes, neither at their face value nor at another value, but, instead, refer the note bearer to the bullion market if they want gold in form of coins or in another form? They would add: But our debtors are obliged to accept our notes as their face value, at least for the amount that they are indebted to us. Posters, in the case of our debtors, will inform everybody of the opportunity to so utilise the notes. Addresses are given by our offices.
Whether the system (that of the Four Bills) is called a Free Banking system or not: certainly, it is independent of that kind of trust which you mean.
In cases of a general run (the word "run" used in the sense of 1913), your system breaks down - - admit it! - - but under the system of the Four Bills nothing else happens than a run on the shops, which, for shopkeepers, means a boom.
That this must be the effect of a system of notes not redeemable is not a new knowledge.
Several times it was proposed to offer those, involved in a "run" on the bank, public bonds endowed with good interest and on a gold basis (or, in silver countries, on a silver basis).
I encountered this idea at first in an old Danish law enacted at the times of Napoleon I, then a similar law was enacted in Prussia, some years later. Still, when the German "Rentenmark" was created in the year 1923, the possibility to purchase gold bonds with it was provided for by the law and for the "runners".
(The Danish law and the Prussian are, perhaps, due to the same man: Niebuhr, the famous historian and formerly manager of the Danish State Bank and later of the Prussian. On the other hand, I read in a biography of the Prussian Minister, Freiherr vom Stein, that King Friedrich Wilhelm III. proposed it.)
Certain is: To the extent to which a "running" public buys bonds with the notes that it distrusts, the run on the banks is diminished.
You say, that in the past such crises (here runs) were mainly caused by the operation of the gold standard. You here use the world "gold standard" in the now generally used sense (English usage), where it means: obligation of the note issuing bank to redeem its notes at par on demand. You know, that several times before 1914 the Bank of England was freed from this obligation by an act of Parliament, but that time nobody asserted, that then (1825 etc.) the country would no longer be on a gold standard. Prices in the shops continued to be fixed in gold coins, and that was considered as essential.
Concerning the commercial value of gold coins, I repeat my opinion, that the greatest observed fluctuations in times of war, revolution, etc., were considered, by the public, as quite unimportant - compared with the fluctuations of any kind of paper money. Therefore, the public, especially in such times, preferred gold coins to any other means of payment. I claim for the public the right to continue in this mentality, but - - of course - - for anybody the right to express a quite different opinion on the constancy of the value of gold and to act as he thinks fit.
Here, also, is to be remembered, that if gold itself is the measure of value, then it does not possess a price.
(Ingots may be sold at a price, coins of domestic origin are not sold and do not possess a price - if the gold standard - - the word used as Adam Smith used it or Jevons - - is legal.)
Do you know of one example that sovereigns in England were sold, say, in the years from 1860 to 1910????
Therefore, I cannot acknowledge that the advisability of gold coins as exchange medium (why not include their function as measure of value in the shops??) depends on the stability of the free price of gold.
Consequently, I do not think that the price of gold coins will be stable if governments do not interfere with it.
But its usefulness, purchasing power and abundance will reach their maximum if governments do not interfere with imports, exports, possession and transfer, supply and the demand for gold coins.
Further, I cannot agree with your opinion on bank reserves. I demand the legal possibility to issue notes without any reserves, the latter word taken in the usual sense of bankers. I assert, that the readiness to accept the notes at par, by the bank's debtors and by the bank itself, is quite sufficient to keep the notes at par at the bullion market.
(That's a very important point!)
But if a bank wants to do business with bank reserves, it may do so - - of course I do not demand the prohibition of such a business. But let me remind you of this historical fact:
The merchants of Amsterdam and of Hamburg - - although no blockheads - - thought it absolutely necessary to clear debts, fallen due, with the help of a stock of silver-coins. The example of the clearinghouses at London, Edinburgh, etc. did not impress them in the least. And then arose circumstances, which prevented them from using their silver. And - - wonder - - now they saw that clearing was possible without a stock of silver.
A note in the system of the Four Bills is essentially a clearing-certificate. And, therefore, this note does not require a bank reserve.
Furthermore, I cannot agree with what you say on the necessity to keep a gold reserve for use in external trade. Today no creditor demands gold in external trade. When he demanded gold before 1914, he did so because the law entitled creditors of all kinds to demand gold when the debt fell due. If such a bad law would not have been enacted, or such an interpretation of the legal state would not have been given by the courts, then the debtors would have answered:
You demand gold? Very sorry - - I have none!
In commercial affairs it is not usual to do more than is formally agreed. I often pointed that out. If you will refute me: for facts and reasons I am - - I hope - - susceptible.
What you say about the situation of Germany in external trade is what I daily read in papers. I contend and have often pointed it out, that Germany's situation would be quite different if there would exist:
a.) a free bullion market,
b.) a free market for foreign exchange,
c) the legal possibility to use Milhaud bonds.
Average writers may be excused for not knowing the Milhaud bonds, but what a free market for bullion and for foreign exchange is, that they do know.
They should know that a country's situation in external trading is much more influenced by prohibiting such a market than by any other circumstance. A note for The Economist and some others, for their note books!
You say: "Germany is forced to do it now because she cannot sell enough on short credit."
In several letters I pointed out to you:
1.) From all sides commodities, victuals, etc. are offered to Germany on the best conditions and that the government is now endeavouring to keep these commodities out of Germany.
The government's slogan seems to be, as Zander expressed it:
"Drohend steht der Feind mit Brot und Speck an der Grenze! Lasst ihn nur nicht herein!"
(The enemy stands threatening with bread and bacon at the frontier: Do not let him in at all! - J.Z.)
2.) Credits on a gold basis are formally prohibited in Germany. But no foreigner is so blocked as to grant credit to Germans on another basis than the gold basis. Let this impediment be removed and then let us see if credits on long terms would not be possible in Germany.
Here, too, I am open to a refutation based on facts and reasons.
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Salazar. You are right, he is not an aggressor, but for a similar reason for which a wolf among lions is not an aggressor.
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India. "… a parliament can prevent him, provided that parliament has the support of the majority of voters …"
For the next Indian dictator the majority of voters will be as a flock of bleating sheep. The events in India prove, that the system of parliamentary government - - invented in England at a time very different from our time - - is quite unfit to protect the people against dictatorship. A new system must be worked out. The basis is given by Benjamin R. Tucker. Our task should be to complete it.
When Hitler proposed dictatorship, he said: Listen, people! I propose it merely:
a) to protect you against a war,
b) to remove the obstacles to full employment,
c) to give you the best administration the country ever had.
A parliament cannot achieve that. (There he was right!)
That the Germans did not discover the impossibilities in Hitler's promises may be an objection against their asserted capacity to govern themselves. But many other people became the prey of dictators under circumstances incriminating them much more than those of the Germans were (without a doubt), incriminated by their elections in the year 1932.
Must I point out the reasons for which I believe that every single Indian of the 400 millions was much more independent under the Pax Britannica and the government as it was - - say - - under Curzon, than he is now?????
I know well (and you know it, too) that many millions of well-informed and patriotic Indians fully share my opinion.
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
Dear Mr. Meulen, 4. I. 1951.
I wrote nothing about the many printed matters I get by your kindness in the last weeks. Ascribe it to the cold in my chamber and the chilblains on my hands, which compel me to reduce my correspondence.
I received inter alia:
1.) "The Economist" of 23. 9., 11.11. & 2.12. 50,
2.) "Frontiers", 10.5.50, pages 6 & 7,
3.) "Truth" of 17. 12., 1.12. & 24. 11. 50,
4.) "International Financial News Survey", 10. 11. & 17. 11. 50,
5.) "The Interpreter", 1. 10. & 15. 11. 50,
6.) "City Press", 8. 12. 50.
7.) "Malthusian", November 1950.
8.) " The Economic Digest", of May, April and November 50,
9.) "United Nations Experts Propose USA-Finance Nationalistically Planned Economies", by Phil Courtney, with an interesting letter by you to Courtney.
The day before yesterday I received:
1.) "The Economist" of 9. 12. 50, 23. 12. 50,
2.) "L'Unique", Nos. 47, 51, 53,
3.) "analysis", June 1950, November 1950,
4.) "The Literary Guide", Jan. 1951,
5.) "Economic Intelligence", August 1950,
6.) "International Financial News Survey", 1.12.50,
7.) "The London Newsletter", 23. 11., 14. 12., 21. 12.,
8.) "The Monthly Record", October 1950,
9.) "National News-Letter", No. 752,
10.) "City Press", 15. 12. 50.
Several clippings, too.
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Clipping from 'The Times" of 24. 11. 50: "German Local Government".
As the last elections in Berlin as well as in the Western Zones prove, National Socialism in the form of Hitlerism is practically dead. Why? One of the many reasons is: Hitlerism lived on a very small basis, and that basis was destroyed in 1945. What was the basis? It was the power of the government to compel all government officials to enter into the party or into its organisations. That power was not only the normal government power. The whole economy was subdivided by the Nazis into "Fachschaften", about what Cole, 30 years ago proposed, when he demanded the organisation of England by subdividing it into "national guilds". Perhaps the Nazis learned that idea from Cole; the interest for "Gilden-Sozialismus" was very great in Germany 30 years ago and translations of Cole's book were widespread. But important ideas seldom - - perhaps never - - come into being in one brain only. In most cases they arise in several brains at the same time, a fact realised in the most surprising manner by all patent offices. So the idea of "national guilds" was also proposed by Catholic economists and approved by the pope, who published the famous Encyclica "Quadragesimo anno" in the year 1930 or so.
It's a very bad idea, and Cole proved to be an intelligent man by abandoning it completely, perhaps after he saw what the Nazis had realised with the help of their "Fachschaften". Their proceeding was this: The leader of the
"Fachschaft"- - say insurance - - compelled the managers of the great companies to become members of the party. Then he demanded from time to time the names of the heads of the departments, who were not yet members, the reasons for which they were not, if they had formally declined to become a member, etc.
If such a circular was known in the factory of office, all chiefs trembled and crowded before the door of the party delegate to become a member. The effect was not the expected. When the people were members of the party, opposition was less dangerous than before. At last it became necessary to gather the real Nazis in special organisations.
When the war began, compelling people to join the party was stopped for a reason I do not know. I knew some members of the party, who told me freely, that they had voted for Hitler and then had been compelled to become members. The said: "Had I known, what I know now, I certainly would not have voted for him!" That I heard often. On the other hand - - to tell the truth - - I met very intelligent men, who were real fanatics and went to the party meetings like pious Christians go to their church.
In May 1945 the many millions compelled to become members, became suddenly free. It was a great mistake by the Allies to treat all these men and women as "Nazis" and dismiss them. Man of them had been excellent officers and had been in their jobs for decades. so it was with the members of the "Rechnungshof" in Potsdam, the court for financial revision. One day the manager had made known: I incorporated the whole office into the party; is there one man, who will not belong to the party? Of course, there was none. The objector would have been sent to a concentration camp at once.
Without the system of the "Fachschaften" (national guilds), the Nazis could not have won so many members in so short a time. As far as I know, this system is also accepted by the Kremlin.
The sudden dismissal of some hundred-thousands of competent officials and their replacement by "democrats", who knew nothing, made Germany in a few weeks into one of the worst administrated countries in the world, and in many respects she still is. Twenty years ago she was one of the best administered.
(J.Z.: Even the best administrators cannot turn bad laws, systems and institutions into good administrations. "We do not want to get all the government we pay for!" - J.Z., 23.3.03.)
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Clipping from "The Times" of 4. X. 50. "Dollar surplus". The spectre "Dollar gap" is disappearing - - well - - but Dr. H. C. Hillman, M.A. of the University of Leeds said, at lecture in the British Information Centre, that it disappeared in connection with the war. After the war - - supposed the war does not become a world war - the dollar gap will arise again. I asked him in the discussion, what he thought about the possibility that England paid in Pounds and Germany in Marks. The idea was quite new to him, although he was a very well informed man and knew all important economic events of the last 20 to 30 years, with dates and numbers connected. (He spoke an excellent German and at last by his sympathetic manner won even the nationalists among the listeners.)
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Clipping: "Rearming Germany". There is - what no paper dares printing - - a deep distrust in the military qualities of the present commanding generals. Concerning Eisenhower, many remember that he needed many months to clear Italy from the German Armies, although his superiority was (it is said) about 4 : 1, at least in aeroplanes and tanks, perhaps also in artillery.
In such a quite abnormal situation perhaps a right of armies to choose their commander would be a solution.
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Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
9. I. 1951. Your letter of 4. I., received 6. I. 51.
Dear Mr. Meulen,
considering only the economic point of view, the investment of paper-shillings in chain store shares seems excellent. I do not know any better. If stores priced their commodities in gold units - - a reform that must come - - you will profit not only as a buyer but also as an investor.
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My sister writes me from Wiesbaden, that there chicken cost 2 DM per German pound. That's less than presently at Berlin (2.60 DM), although Wiesbaden was and still is ill-famed for her high prices.
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Temperature in Berlin has much improved. At the street 6 1/2 degrees Celsius = 43 1/2 degrees Fahrenheit. My window is open. I dislike the closed-in air of a room and consider one or two additional chilblains as the lesser evil.
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Gold coins again.
You say - - not expressis verbis, but indirectly - - the measure of value, say for the purpose to express prices in shops, should be a paper money, managed by an honest, trustworthy, intelligent, etc. man. Gold coins are a bad measure of value.
I say: gold coins daily offered and demanded at a free bullion market (the latter condition is quite essential) are the best means to express prices in shops which have been invented until now. All in all, they are the least evil for that purpose.
When now paper money is used as a means to express prices in shops, it is because it is endowed with cours forcé. (Please invent an English word for cours forcé!) It is not because people trust in that paper money.
They do distrust it, as is proven by the occurrences in the savings business.
If the cours forcé would be repealed, within a few weeks or months all shops would have introduced gold prices (in the sense of 1913) and, consequently, the workers would demand gold wages.
If on the same day, when the cours forcé is repealed, freedom of note issue is admitted, then there will be at least 100 honest, trustworthy, intelligent etc. men who issue notes, but every man would pursue a system different from the systems of his colleagues. A most interesting time of experience would begin. Within less than a year all paper money would be refused, by the public, which is not at par with gold coins.
There may be organised special "Zahlungs-Gemeinschaften" - - to use an expression invented by Knapp (his daughter married the Bundespraesident Heuss), which prefer a special paper money - - say, that issued by you - - as measure of value and as means of payment and, perhaps, one of these Zahlungsgemeinschaften survives as the best and at last becomes the Zahlungsgemeinschaft of the whole people. That will be a process for years.
But the next consequence of repealing the cours forcé and admitting Free Issue of Notes, will be that gold coins as a measure of value are accepted by about 99 % of the population.
That is to be foreseen with the certainty of a lunar or other eclipse.
Economists speaking of the "gold standard" should distinguish (what very few did and do):
a.) gold coins continually exposed to offer and demand at a free market, as a measure of value and means of payment in shops,
b.) the obligation of a bank of issue to redeem its notes on demand, or with a delay, in gold,
and they should foresee:
c.) the possibility to keep standardised means of payment at par with gold coins, not by the obligation to redeem notes but by quite different (an in practice simple and easily to be applied) means.
The terminology of some recent economists (Kitson, etc.) to reserve the word "gold standard" for b.) should be quite abolished as contrary to scientific and even common language and to logic.
In this connection I read with great pleasure the article marked by you in the April issue of "The Economic Digest": "The Growing Influence of Gold". In this article the expression, "free gold market" is used as it was ever used in the USA and was used in England in the 19th century. My impression is that the illogical and in no way established terminology of Kitson is now abandoned. In none of the journals, that you were so kind to send to me, did I find the expression "free gold market" used in the sense of Kitson.
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Long-term loans again.
We both say: Long-term loans should be possible quite independent of a-given state of supply with currency, whether this currency be gold coins or paper money, privately or government-issued.
In a case of general hoarding, e.g. banks and other institutions should have the right to issue, at once, fresh and standardised means of payment; as many as are in demand; while, on the other hand, the right of the public, to refuse suspect or undesirable means of payment offers a sufficient protection against over-issues.
The freshly issued and standardised means payment should be also suitable for use in financing long-term loans. But from here on we differ.
You say: The financing of long-term loans should be performed by handing over notes to the debtors. There is, practically, no upper limit for note issues, although the fresh notes are not endowed with cours forcé.
(J.Z.: Perhaps B. should here have asked: What is the function of capital market securities at all, of saving for them and investing savings, if that were possible and a sound policy? Could governments banks or privileged note-issuing banks really "finance" all medium and long term capital requirements merely by their note issues? What was the effect whenever this was attempted? Are savings and the purchase of capital securities with them, quite superfluous? - J.Z., 24.3.03.)
I say: The possibility for issuing standardised means of payment without cours forcé is limited. Experience shows that the limit is about the value of a month's production of the country. (3 to 5 weeks, or so.) It is, in practice, not possible to finance long-term loans by simply handing over freshly printed notes to the debtor. Such a "financing" would involve over-emission, and such over-issues produce a discount of the notes in a free market. The discount produces wide-spread refusals of the notes.
But long-term loans for useful purposes are always possible through interest-bearing bonds.
The purchase of interest-bearing bonds and the sale of such bonds can easily be performed with the help of a note-issuing bank, shop-association, etc. (under certain conditions. - J.Z., 24.3.03.)
Loans should be so organised, that the bonds, when falling due, are not redeemed by currency but are accepted by the debtor in his normal business, a procedure wide-spread in German before the currency reform of 1908.
(That would be just one of the repayment option. The standard one would be the repayment of the loans with the standardised goods and services vouchers then issued and accepted by the debtor in his business and used then to repay his loan. In anticipation of his shortly upcoming repayment obligation, more such notes could be issued, based on the goods and service capacity of the debtor. In this way, not only the debt certificates of the long-term debtor, in the hands of a few, could be used as means of payment against him, but suitable currency, issued for that purpose and being in the hands of many of his customers, making them and thereby him more "liquid". Here B. does not mention the precautions to be taken when those, who are prepared to grant the long-term loan, use shop foundation money (privately issued notes) to subscribe to the loan certificates, or declare their readiness to undertake such an obligation. Here, too, the bond-issuing bank would merely act as a mediator and facilitator between those really granting the loan, with their goods and services, and those receiving it. Long-term notes must have the backing not only of the good will and intentions of the issuing bank but that of those, who with their goods and services do really support the loan and do undertake corresponding obligations and obtain corresponding rights, in certified form. Otherwise, under the Meulen-system, the bank would write out a "cheque" upon their goods and service supply capacity, and this without their consent and without granting them certified capital investment rights. Naturally, they are free to discount and refuse such issues. They are under no obligation to accept them, no more so than they are under obligation to accept the bonds, shares, mortgages or other securities that others have issued. That these appear would then in the form of freshly printed banknotes, of supposedly trustworthy banks, does not change their nature. They are then merely camouflaged capital securities - which do not even promise any interest payments. The obligation to publish the issue and reflux details of all free banks would rapidly reveal this kind of fraud. So would the note-exchanges between issuers and acceptors and, naturally, the free market for competing private money issues. - But B. was quite right in pointing out this alternative repayment option as well, as he did here. - J.Z. - 24. 3. 03.)
The same should be the case for coupons when they fall due. (In the shop of my father, I often saw such coupons (at Duesseldorf); in Rhenania they served as currency. (J.Z.: B. never told me about the shop of his father or about his father. Apparently, there was a very serious clash between them, which, according to Mrs. Rittershausen, even led to a court case between them. B. must have felt that he had been greatly wronged but thought it better to never talk to me about it. - J.Z., 24.3.03.)
By such provisions a complete independence of the economy from the supply of currency with gold coins or State or other conventional notes is guaranteed.
Even if, within an hour, the whole currency is hoarded and has thus disappeared from circulation, within the next hour a fresh currency can supply the disappeared one.
(J.Z.: Well, even instant printing does take some time. However, under competitive note-issues forms and printing facilities for new issues are always ready, just waiting for new orders, which might be given by telephone. - J.Z., 24.3.03.)
Experience in a society free from the note monopoly, free from cours forcé of the currency and from similar restrictions will teach us both.
(J.Z.: A polite way of making his point here, seeing that M. habitually ignored such experiences and hints towards them. Faith or fixed ideas over facts, as happens all too often. However, the defects of Meulen banks would make themselves rapidly known to those who tried to establish and conduct them and who dealt with them. Then even M. could not have ignored the facts any longer. Like so many, he was a well-meaning and benevolent pragmatist or practical man, who relied all too much on false ideas, principles, defective premises and traditions and without a thorough enough knowledge of relevant experiences. Nevertheless, he did manage to keep the general ideal of Free Banking and Free Trade alive, for decades, however flawed his own ideas about them still were, in their details. - J.Z., 24.3.03.)
We both agree that everyone should have the right to try his systems and to offer to his fellow citizens means of payment of a system which he things to be the best.
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"Individualist" and currency reform.
Individualism is an "Ism" as are many others and in itself is no more interesting than, say, the doctrines of the old Eleates or of the Pythagoreans. But Individualism leads to enormous consequences and for this reason it is more important and interesting than any other Ism ever invented. There is a immediate connection between Individualism and currency. Also connected with individualism are internal trade, external trade, the wage system, the standard of value. There are, perhaps, few sides of practical life not connected with Individualism. If I had the possibility to write a book, I would insert chapters like:
1.) Individualism and currency, a new aspect of the problem.
2.) Individualism and the until now tried means to remove unemployment - a quite new aspect of unemployment.
3.) Individualism and control of foreign exchange, an unexpected connection. Etc., etc.
Certainly, it is possible to consider Individualism without its consequences, but that is like considering attraction without regard to the stars's mutual attraction. ( J.Z.: … that is like considering gravity without regard to the mutual gravitational attraction between starts and between stars and planets and between planets and moons. - Perhaps that is what he may have meant with these words. - J.Z., 24.3.03.) Then it would be interesting only for a few people, some mathematicians and some philosophers.
Individualism not only supplies quite new aims and new views, it supplies also the technique to attain the aims and supplies reasons against false techniques. That an unlimited right for individuals to issue standardised means of payment, combined with the right of other individuals to refuse these means of payment, is the best monetary technique, can only be discovered by starting from Individualism. Starting from any other Ism, one comes to State inflation (the word used in the sense of 1913), to Keynesian managed currency and such monsters.
If until now some readers were not content with the monetary articles of "The Individualist", it may have been because the articles were not always individualistic enough. E.g.: The right to refuse means of payment is as important as the right to issue them, but I never met an article on the right to refuse paper money.
Special interest in money questions: I assert that in England there is much interest for money questions and in the ranges of readers of The Individualist certainly not less than among readers of - - say - - The Economic Digest, which frequently publishes articles on money questions. Concessions to modern money theory or Keynesian theories are in all cases contrary to Individualism and not only may frighten readers aware with their Anti-Individualism but also because they read them daily in their papers.
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My modest contribution to a system of monetary liberty was for your personal information, not for being published in The Individualist. For that purpose it must be more carefully worked out.
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Your remarks on right. That's a very interesting point and goes deep into philosophy. In the German language the problem would represent itself in a different aspect.
The German scientific language distinguishes:
a) Recht, and (Right - J.Z.)
b) Befugnis. (Authorisation, Permission, Licence, Privilege. - J.Z.)
The first is that kind of right which is, as Schiller says, "mit uns geboren" (born with us. - J.Z.) It is independent of a grant by any powers.
One may say: A Right not granted or at least acknowledged is an "idea" and has nothing to do with reality. That would be an error. Repeatedly in history rights believed to be inborn became the most effective powers. Carlyle, in his history of the French Revolution represented this fact in a most convincing manner.
Some time ago I read the following little historical story, which happened 100 years or so ago.
At a little German settlement - - numerous at that time, when, after 1848, so many Germans emigrated to the USA - - appeared one day a Negro. He was a slave and had fled from a Southern State. The German peasants gave him food and the advice to go to Canada, where he would be in perfect safety. This Negro went North, but a few days later reappeared in the company of two Southern policemen, who had pursued and caught him. He was covered with blood dirt, for he had fought before they could arrest him. The policemen demanded from the sheriff food and assistance. The law of this Northern State was that a policeman in legal service of another State could demand assistance of any sheriff. But the first thing that these Germans did was to liberate the Negro and to badly beat the two policemen. Then the sheriff arrested them and send the Negro, with a villager, to Canada. Only once that guide had returned and informed the sheriff, that the Negro was safe, did the sheriff let the policemen free and gave them the advice to leave Minnesota as soon as possible. If he saw them again, he would accuse them before the inhabitants of kidnapping. All that was against the law, which was here on the side of the policemen. But the Germans took the standpoint, that the inborn right of every man was on the side of the Negro. And thus this seemingly uninteresting right here had become a power.
If I say in German: "Jeder Buerger soll die Befugnis haben, Noten auszugeben" (Every citizen should have a permit to issue notes. - J.Z.), the sense is: the government shall permit it. And if the government does not permit it, every good citizen helps the government to suppress private note issuing.
But if I say: "Jeder Buerger hat das Recht Noten auszugeben" (Every citizen has the right to emit notes. - J.Z.), then this means, the government acts as a tyrant if it suppresses this right, and every good citizen helps to remove such a tyrannical government.
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In my next letter I hope to continues. The matter is of very great importance.
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Very faithfully Yours - signed: U. v. Beckerath.
(J.Z.: B. liked the method of Jesus Christ, of telling little stories with a message, and, likewise, the method of Socrates, who asked leading questions. He blamed Socrates for not having asked a simple question during his "trial", namely: Can you point out to me even one Athenian citizens, whom I have, supposedly, "corrupted" by my talks?" - Since thousands of Athenians had listened to him, and, obviously, had not become "corrupted" by him, this question would have brought them forward, in their own defence against that libel and also in defence of Socrates. Alas, the best reply is not always readily at hand - until the best replies are finally combined in a vast encyclopaedia of the best refutations so far found of all popular errors, myths, fallacies and prejudices - which are obstacles to human progress. - J.Z., 24.3.03.)
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13. I. 1951. Your letter of 10. cr., received today.
Dear Mr. Meulen,
chicken could be imported to England from Germany. They could be paid in Pounds, if there were not the prescription not to pay them in Pounds. Certainly, the German exporters would gladly accept Pounds. The cost of the transport to London is hardly greater than the cost of transport from the village, where the chicken are hatched, to Wiesbaden or Berlin. I do not know about the English duties on imports.
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Payments abroad. You say: "The point of our discussion was: Is it better that London should pay for American exports Pounds or dollars?
I think, the point was another one. I affirm (thank you!) that if there is a dollar-gap or a similar gap, it should at least be tried to pay imports by a money that is at hand, so as in England's case Pounds are at hand and in Germany's Marks. At least one party should ask the other: Will you accept that and that money? I know now, from the discussion at the lecture of Dr. Hillmann, that that possibility was never discussed England.
(J.Z.: I once participated in a large meeting dealing with foreign exchange rates and their difficulties, under foreign exchange regulations, in which the alternative of freely floating exchange rates was rejected out of hand. And in another lecture, by Robert Conquest, to a large crowd, mainly of teachers at Sydney University, in which this speaker admitted that he had never considered the possibilities of education without all its compulsory and monopolistic features! And that aroused no protest in these circles of vested interest in compulsory miseducation. How narrow-minded can specialists and "experts" get? - J.Z., 24.3.03.)
I do not deny that sometimes it may be profitable for England to pay in dollars, and if Germany possesses enough dollars, it may be profitable for Germany to pay not in Marks but in Dollars.
I did not affirm that the rate of the exchange would be affected by offering dollars for pounds or pounds for dollars at London or at New York.
You say (indirectly): There are enough dollars available to English importers, so that they do not need to offer pounds. But all English papers say the contrary and always speak of a dollar gap, and Dr. Hillmann came from Leeds to Berlin to deliver a lecture on the existence of that gap. He spoke so well and convincingly, that I must believe in the existence of the gap. I differ from Hillmann only insofar as he said: To remove that gap we must reduce our prices and get new possibilities to export. My standpoint is: Before you do that, offer to American exporters Pounds. If they refuse them, then it will still be time to scrape together the needed dollars by exporting.
The now used procedure demands: First export, then import, by the thus earned foreign exchange.
The natural procedure would demand: First import, provided the foreign exporters are content with our domestic currency. If they are not content with it, then they may keep their commodities.
(They burn to sell for pounds in England and for Marks in Germany.) (They are most eager to … - J.Z.)
Then await the return of the domestic currency and give the people, who present it, what the people demand.
Here all great libraries are burnt. If not, I would have stated, for years, which American law prevents Americans from accepting other currencies than dollars, and which English law forbids the export of Pounds. The German law, which forbids payments in Marks was published (if my bad memory does not deceive me) in the Reichsgesetzblatt of 1934.
Gold coins again. Certainly, I admit that today the price of gold, expressed in paper money, is affected by fear of war or political upheaval. But the prices of all commodities of the wholesale trade are so affected. The relation of the paper price of gold to the paper price of wholesale commodities is much more stable than the purchasing power of paper money. Expressed in other words:
The "gold prices" of commodities are more stable than their paper money prices. That is by no means a new discovery.
Why gold, after being minted, shall be a worse measure of value or in any respect less useful than ingots, I do not see. To melt government-manufactured coins into bullion is prohibited in England, yes but:
I.) Replacing this melting by exporting the coins to countries, where they may be legally melted, is a very old practice and
II.) the law does not prohibit the melting of privately standardised ingots (medals), such as I proposed them.
We must not overlook the fact, that the State has failed in all spheres, also in providing the people with standardised ingots of precious metal. But - - calumny even of the devil would be wrong - - it may be that the mints even today continue to provide the gold industry with standardised ingots in the shape of legal gold coins, but without stamping them. (A good thing, which in normal times protects the gold coins from being melted.) From a report of the Reichsbank (1908), I learnt that this expedient has probably been invented by the American Mint.
Concerning the price of coins one must distinguish
a.) times when coins are legal tender, are uses as measure of value in shops and paper money is not legal tender, also is not acknowledged by merchants, etc. as legal tender, and
b.) times when paper money is legal tender or acknowledged as legal tender.
In the case of a.) a price of gold coins is impossible and has never been observed.
In the case of b.) a price of gold coins is normal.
I suppose, that also during the crises of 1857, 1866 and 1890 gold coins will have had their price and a higher one than L 3. 17. 6., the latter in paper or silver or copper.
Interesting is your information, that in 1812 the English Government paid its troops in Guernsey with guineas and gave them for 23 s., the latter obviously against the law of 1811. (Free Banking, page 106.)
What I said above under a.) and b.) is not affected (I hope we agree on this) by the English law, that Notes of the Bank of England are legal tender as long as the Bank redeems its notes on demand at par.
(Keynes, in his tract on monetary reform - - burnt - - reports that during the first world war the Bank of England left those people to wait, who came to change their notes for coins, for days and longer, and opened only one counter for the purpose of redemption.)
Free Banking. You say: "… shopkeepers will not find it so easy to replenish their stocks."
Here you are right, for many kinds of crises. But it has nothing to do with the notes in my system. Here the shopkeepers get short-term loans from the bank and the interest is so high, that shopkeepers use every note received primarily to repay their debt to the bank.
The replenishing of stocks of shopkeepers is never financed by note-issuing banks and insofar has nothing to do with our discussion.
Let me remark here, that I the crisis of 1932, one of the severest ever observed, the wholesalers applied urgently to shopkeepers to buy commodities on the most easy terms.
Since you prefer your system to mine (you will excuse this short expression), please tell me, to what extent, in your opinion, England's circulation will absorb your notes under circumstances favourable to your system.
And, if you have estimated the amount, please tell me how long-term loans will be financed in your system once this limit is attained.
You style "my" system as less delicate than yours. Your system is much simple to manipulate than mine. But the disadvantage is - - in my opinion - - that the system does no longer function once the quantity of notes per capital surpasses an amount of 5 or 6 guineas per head, expressed in paper money. That would be (correct me, if I am wrong) the highest amount per capita - - coins + paper - - ever observed in England.
But the need for long-term credit is much greater than that sum. It may be 5 guineas per capita and per annum. England will leave your system if your notes get a discount at the market because of over-issues.
Once the discount arises, then the circumstance that your notes are not endowed with cours forcé will become effective. Then the thing becomes delicate for you!
If the enemy has occupied the territory, then neither my system nor yours will be applied but military notes of the invading army will be used.
If military notes are not used, as in the war of 1870/71 in France, and at the times of the Napoleonic wars, the most delicate commercial operations are executed, as in times of peace, as is reported in many memoirs; local histories, etc. of those times.
In Prussia, in the years from 1807 to 1815, times of great misery and troubles, bills of exchange, trading in futures and many complicated other methods, as were used in that time in the Netherlands (the commercial teacher of Prussia), were also used in Prussia.
At this time, the idea arose in Prussia to diminish the commercial risk by a transport insurance. I will not enter here into the details, since they are found in every good textbook on insurance.
By the way: From old laws and old textbooks I learnt that commercial business and credit business, in old times, say 150 years ago, was much more complicated than, say, in 1913.
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The business of future note banks will, primarily, be to provide means of payment for wages, so that workers, employees and artisans become able to buy.
Before 1844 note banks had nothing or nearly nothing to do with that business. Many considerations, quite right for old times, are no longer applicable to the future note business.
Moreover, in old times note issuers handicapped by redemption obligations. Their business was limited by the store of precious metal they could secure. The optional clause protected (not theoretically but practically) the stock of precious metal, but did not enable bankers to issue without such a stock. That is a very important point. The seven authors of the Four Bills often spoke of that circumstance and at last we agreed:
1.) The abolition of the redemption prescriptions and replacing them by keeping the notes at par at the market, creates a quite new moment, one until now not discussed in theory.
2.) More than 3/4 of the experiences of the old note banks (In Germany more widely spread than in Scotland) are not applicable to the new business, seeing the old experiences were primarily concerned with the possibilities to protect the bank's precious metal.
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Balance of trade. You are - - I see - - on this point and adversary of Adam Smith, David Hume and some others of that rank. that is a very bad position. It is like standing at the top of a steeple and this in a storm of 30 yards per second. He, who dares that, must fall. You mast here fall, too.
Do you know the German statistics (probably repeated abroad) on the balances of trade? Some decades ago a German economist - - I forgot who - - said: If the balances, reported in the statistics, are right, then the sum of all imports in the world must equal the sum of all exports, with slight differences. He found, in the average, a difference of 15 % in favour of the imports. The next year was the same and so it went for many years. Always the imports of the world were greater than the exports. Einstein's relativity theory was not yet known at that time and so the man dared to say: The laws of arithmetic remain valid and those of logic, too. There must be a systematic error in the statistics.
If I had in this cold (5 degrees Celsius at the street = 41 degrees Fahrenheit), and no coal, the possibility to write more, I would here reproduce the investigations of Liefmann in his excellent "Gold und Geld", 1916. Liefmann proved by numbers what Adam Smith and David Hume proved by reasons. He demonstrated, that the doctrine of the balance of trade is an agreed upon fable ("convenue" says B., from French usage. - J.Z.) and has nothing to do with facts.
The gold movements in the world - - he says - - were seldom caused by trade movements.
Liefmann said nothing of the law empowering creditors to demand gold instead of referring them to the clearing possibilities. But, certainly, that law was the conditio sine qua non of the gold movements.
You do not believe that the said law had much to do with the gold movements. I will share your opinion if you will be so kind as to present me with your reasons.
But you are right: If gold would not have been sent, then the value of paper would have fallen still further than it fell, and imports were reduced and exports were encouraged.
I say: Why not???
When the exchange rates are lowered by a devaluation, all people say: We have a prudent government!
And if the effect is produced by the market, exactly in the measure required and for the time required - - something impossible to perform for a government - - then the same people say: The market is an evil thing. It must be counter-balanced by gold exports and similar nonsense. (The latter from a philosopher's standpoint.) According to popular opinion, the best way is, to abolish the market and replace it by a planned economy!
Commodities offered to Germany. No - - at the moment Germany is much better off - - the chicken price proves it, although the price, immediately before Christmas, may have been some Pfennig higher than later. But you will have your revenge. The Professor Noelting, "Grosse Kanone" (famous expert - J.Z.), demands energetically the reintroduction of the Zwangswirtschaft (planned economy), "before it is too late". (How do you consider this "excellent reason"????)
You say: "… political relations are so uncertain that creditors are not inclined to give long-term credits. If Germany, as people believe (I am not sure) imports more than she exports, there must be creditors who wait until they are paid. If the payment is performed soon, then the credits are short-term credits and if not soon, then the credits are long-term credits, and a third possibility does not exist. But, if you will demonstrate to me, by examples, a third option, then I will accept your opinion.
India. You say: "The best government in the world is no substitution for self-government."
You are very right, but if the present regime of Nehru and his court is a self-government, then the governments of "Emperor Henry I" of Haiti (established 1811) and of "Faustin I" (established 1849) were self-governments, too.
Parliament? Come to Berlin, go to a Russian Cinema and be impressed by the parliamentary scenes of Eastern Germany, which are often represented there. Two days ago, I saw them in the cinema at Bahnhof Friedrichstrasse. (50 Eastpfennig = 10 Westpfenning.) But, to tell the truth: I seldom saw a better film-technique, even at the non-political films, which were very good. The music was good, too.
Britain held all the executive posts??? The number of British officials was smaller than in a small English town - - at last only 600 or so.
Colour bar: Here you are right. But is it removed? Has the Pariah the right to work side by side in factories with the Hindoo? (Theoretically, he has. Practically, the workers go on strike when a Pariah is admitted.
Before, there was established a "Bank of India, with its privileges, there was a right of private institutions to issue standardised clearing cheques. The "National" government repealed this right. I do admit, however, that this right was rarely or never practised.
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Thank you, beforehand, for the Punch, which I expect with pleasure. I have always been an admirer of British wit, although - - to understand the Punch well, a very good knowledge of the English language and English conditions is required. The old German "Simplicissimus" was so full of allusions that could only be understood by contemporaries and Germans, so that even young Germans of today do no longer understand all its jokes. I observed that personally.
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Very faithfully Yours - signed: U. v. Beckerath.
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14. I. 1951.
Dear Mr. Meulen,
the clipping from "Times: of 17. 11. 50: "Korean War and after", II.) "A Mixed Legacy from the People's Government", is very interesting.
One gets the impression that in North Korea the landlord in agriculture has simply been replaced by the government's tax collector, so that the peasant still does not keep more than 50 % (or so) of the crop. Nevertheless, the peasant is thankful, for before the agrarian revolution he could keep much less for himself. It was unpleasant to read, that conditions of life in North Korea were not worse than in the South and in some respects (e.g., taxation) better. Obviously, in both territories a great part of the taxes was levied in natura. Already Adam Smith points out what a bad system that is. This fact is also acknowledged by all experts.
I estimate that, if there were agrarian banks of issue and if the governments world permit the peasants to pay taxes in the notes of these banks, the peasants would keep at least 70 % of the crop and the yield of taxes would be at least doubled. The immense waste, inseparable from a tax system based on taxes in kind, would be much reduced or would even disappear. It would be a valuable contribution of monetary individualism (the name would have to be changed; the Asians misunderstand the name) to the Korean problem and not only to the Korean.
(How to perform that? No paper would print such a contribution, which is, necessarily, in contradiction to the whole modern money theory, primarily to the Keynesian, now dominant.
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The clipping from the "Times" of 10. 11. 50: "Excess Population in Italy, Large Scale Emigration as the only Solution", displeased me very much. I state:
1.) Nobody, neither the Time's "Rome correspondent", neither the "population experts", nor the Italian government have considered the possibility to free the import of victuals to Italy from all restrictions, to permit every means of payment for victuals coming from abroad (At the moment - - its seems - - the government permits only dollars), and to stop all kinds of planned economy for victuals.
2.) Even under the present conditions the bakers are looking for customers, not the customers for bakers.
3.) The "experts" take it as self-evident that the quantity of employment opportunity is a given one and cannot, essentially, be increased by human influence - - in other words, they did not read
page 342ff of "Free Banking", which might have taught them, that Italy could even receive Chinese etc. as immigrants and do so without lowering its standard of living, but - it would have to give up her present crazy monetary system.
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Clipping: "Rearming Germany". No paper - - it seems - - dares to print the real opinion of most Germans:
1.) That the Allies neglected to re-enforce their divisions at the Eastern front and that now their military position is hopeless.
2.) That, therefore, a re-arming of Germany would be a useless measure.
e.) That, in view of the present military situation of the Allies, the Germans have to choose between submission to the Russians or suicide (the latter is much discussed) and that joining an Allied military unit would be nothing than a form of suicide, but certainly worse than a cut with a blade over the artery.
Whoever thinks that I exaggerate may visit the Western zones or West Berlin and talk with the people.
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Very faithfully Yours - signed: U. von Beckerath.
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14. 1. 1951.
Dear Mr. Meulen,
in the following I reproduce the German text of a communication which 1 read today in the Tagesspiegel, published by the "dpa", a semi-official telegraph-agency.
"Laender wollen keine Ostzonenfluechtlinge aus Berlin."
Die mit den zustaendigen Bundesbehoerden vereinbarte Umsiedlung von Ostzonenfluechtlingen aus Berlin in das Bundesgebiet is durch den Widerstand der Bundeslaender gescheitert. Mit einem Hinweis auf die eigne Notlage lehnten es die Laender ab, monatlich insgesamt 1500 Fluechtlinge aus Berlin aufzunehmen, wie es mit dem Bund Ende des Jahres vereinbart worden war."
(The federal States of German do not want any refugees from Berlin, which came form the Eastern Zone. Their intended resettlement, first agreed-upon with the responsible authorities of the Federal Government, failed due to the resistance from the federated States. Pointing out the own emergencies, the States refused to accept the altogether 1500 refugees a month, as they agreed with the Federation at the end of last year. - J.Z.)
The monthly number of refugees from the Eastern Zone is about 2,000. The great danger is, that already in these days the Magistrate of Berlin, as well, will refuse to accept these refugees. Then they will be sent back to the East, which for everyone means at least torture in a concentration camp and, for many - - or most - - death as a consequence. Everybody knows that, the Western governments, the Magistrate, the people.
An action by the people is as good as impossible, there is no legal possibility and hardly any illegal one.
Concerning the governments, I must say that their resolution is one of the meanest acts that I know of from the whole of history. One must consider, that here concerned are governments of countries which got, from their former enemies in war, not only millions but many hundreds of millions of marks, in the form of victuals and other things of greatest value for them. Probably some hundred-thousands of people were saved by these victuals. And now these governments refuse to help a quite insignificant number, compared with the help they got, and it is a help not for their former enemies in war, but for their own countrymen. Daily their proclaim their "solidarity" with these countrymen, and now the world sees the practice of that solidarity.
What the governments now does is simply murder of several hundred people monthly. If there would be justice in the world, they must be accused as much greater criminals than the war criminals condemned at Nuremberg.
(Greater? Much greater?: These Nuremberg criminals murdered millions of their own countrymen by their activities, not only millions of foreigners. The total losses due to the involuntary return of refugees to the Eastern Zone are, possibly still unknown. But I remember reports that e.g. deserters from the Red Army, involuntarily returned to the Soviets, were shot before the assembled troops, with the declaration that all deserters would suffer the same fate if they tried to escape to the West. Anyhow, morally the involuntary repatriation of even one refugee to the not so tender mercy of a totalitarian State is already the same as the same victimisation of millions. - J.Z., 25. 3.03.)
If the people in the West would be less indifferent, there would be mass meetings in every town, in which would be demanded the immediate resignation of all ministers in the West and their impeachment. What a difference between them and the noble Marshall Bersarin (not forgotten, neither in the East nor in the West of Berlin), whose first care was to supply the conquered Berlin with victuals! And that, although - - I estimate - - the supply difficulties for the Russian Army in April of 1945 were very much greater than they are now for the governments of the West.
Are ministers, who deliver, in cool blood, many hundreds of their countrymen to death by torture, still morally able to govern?
You and I, we know, that there are no economic difficulties, and that by a few strokes of the pen there would be created the possibility to supply every man, able to work, with employment, and more: there could, by the same strokes of the pen, be created a situation, where every fugitive is a welcome help for West-Germany's reconstruction.
It seems, old Voltaire is in the right, at least for our time:
"Nous laisserons ce monde-ci aussi sot et aussi mauvais comme nous l'avons trouvé en y arrivant."
Very faithfully Yours - signed: U. v. Beckerath.
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15. 1. 1951.
Dear Mr. Meulen,
you know that the Soviets started an international action to "outlaw" atomic bombs. Many people take that quite serious and subscribe to the call. From time to time members of the Eastern youth organisations here try to gather signatures for this call. I think that to be an innocent pleasure. Many people in the Western sectors gave their signature because they believed it was an action considered to be illegal in the East, for it is known in Berlin that the Russians possess atomic bombs and, obviously, are very far from destroying them or declaring their use as "unlawful". Then it was published that this action comes from the East and the public was warned against participating. That was very stupid. If the Berlin parties would have put up posters:
Berliners - - you may sign for such call