MeulenBthSection five 1. XI. 1951. Your letter of 28. X. 51.
Dear Mr. Meulen,
today I saw at the shelves of my librarian (book dealer? Sometimes libraries sell duplicate volumes, too. - J.Z.) an English edition of David Hume's "An Enquiry concerning Human Understanding". The price was very moderate and I secured the book at once.
We are both admirers of David Hume. I think you will gain the same pleasure as I did by rereading the chapter "Of Liberty and Necessity." I read it in the restaurant where I took my supper. The main point is: David Hume is a determinist. I do hope that his explanations will convince you.
The great completion of Kant (who recommended David Hume to every truth-seeker) is:
Freedom is to be found in the unknown sphere where characters are born, not in single actions.
That actions of men are not less determined as - - say - - a lunar eclipse, is shown in every detective story. The detective takes as self-evident that all actions of men are in every detail determined, though men themselves are convinced to be absolutely free at every moment - - the word "free" here taken in the sense in which you took it in your letters. If the detective known the man's character and the circumstances which influence him, he calculates his actions with the same certainty which is given if he knows when the man falls from a roof 60 feet high: How long until he hits the ground? It's merely a matter of calculation. The more distinctly the author shows all persons of his story as being determined in their actions, the more attractive is his story.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
With much interest I read your letter to "City Press" of 19. X. 51. But in this case my impression is - - I can't help it - - that your arguments, too, are not 100 % individualistic ones.
That "City Press" demands a raising of the Bank Rate is - - there you are right - - illogical. If there exists fully free competition in the monetary sphere, then the Bank Rate of the Bank of England is not very interesting. Competition brings this Rate to the level which corresponds to England's economy. If the Bank of England tries to get a higher rate, then the borrowers say: Keep your money. We go to your competitors. It seems that City Press did not consider this simple consequence of free competition which it demands in other spheres.
On the other hand: I cannot see how - - free competitions supposed - - the curtailing of loans by the Bank of England can influence the situation of the 1 200 000 men here concerned.
You protest against the curtailing. Why? Is - - free competition supposed - - the Bank of England not to be free to curtail its loans as much as it likes????
If it curtails the loans more than is justified by the situation of a really free money market (means of payment market would be a better expression) it gets out of business (to that extent - J.Z.), that's all!
What Individualists expect from their leader is that he demands the repeal of all charters (that is, all those granting monopolies), that of the Bank of England no less than that of all others.
----------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
2. XI. 1951. Your letter of 28. X. 51.
Dear Mr. Meulen,
Option clause. I reread some pages of Adam Smith concerning the option clause. ("Optional clause" he calls it.) Adam Smith, in his chapter "Of Money" says that the use of option clauses was an abuse.
Here he was, obviously, wrong.
He was wrong
I.) for the reasons which you gave in your book in the passages where you defended the option clause and in strong but just opposition stated that this clause constituted a great progress;
II.) for reasons, which you do not acknowledge, but which seem to me sound, that is: the "debt foundation", (obligation - - formally agreed or practically given - - of debtors to accept their banker's notes at par in their business) must keep not only option notes at par but even irredeemable notes (Irredeemable at the issuer in gold or silver. - J.Z., 20.4.03.), if the notes are not lent out on long-terms.
I refer to Smith's own explanations on the fundamental difference between long-term and short-term business in
the note-issuing business.
Though the notions "long-term" and short"-term" are different only in degree, from the standpoint of theoretical logic, they are different essentially and substantially from the standpoint of banking science and practice. (I contend.)
But I find a difficulty which neither your theory nor my own explain. Please read, in the said chapter, what Adam Smith says of the difference in exchange value between
A.) London and Dumfries,
B.) London and Carlisle.
The difference - - says Adam Smith - - was 4 %, and he ascribes the difference to the use of option notes at Dumfries.
What may have been the real cause of the difference????????
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
In the October issue of the Individualist you mention me most honourably at three pages. I confess that I felt great pleasure when I read them.
Still more pleasure would I feel if you would become a decided adherent of Cannan's theory of the optimum population. Cannan's progress away from Malthusianism is enormous and one day - - if science has a future - - all consequences will be derived from that theory. You may yourself utter an opinion on which probability is greater:
The probability that Cannan's simple and so well founded statements will be acknowledged by the majority of the thinking part of men in the world, or the probability that that part of mankind, not yet convinced of Malthusianism, will become Malthusians?
You might come to realise that the latter possibility would be a real disaster, if Cannan is right, and the population has not yet attained its optimal number. Then "birth control* must make situation of the people worse.
-------------------------------
Refugees! (B. uses mostly "fugitives" instead. This term has criminal connotations: "A fugitives from justice." But most refugees are not fugitives from just laws but fugitives from unjust laws and measures. - J.Z., 20.4.03.)
Your publication may, in the present situation, become of great practical influence. (Very great!)
(J.Z.: Only if he had adopted a rightful and sensible program on how to provide productive and well paid work for all of them, very soon, and to assure the sales of their products and services, or the additional goods and services that they would offer, if employed in existing firms. Alas, B. never got M. to seriously discuss the monetary and financial steps that would be required for this. In his unshakeable allegiance to his own system, M. refused to seriously discuss any alternatives to it - and his own system was certainly not suitable to quite rapidly employ millions of unemployed and additional millions of refugees and deserters or free immigrants. - J.Z., 20.4.03.)
-------------------------
From your publication on page 55 your readers may learn that a very essential point in Kant's philosophy is: Contributing to social reform and to the world's peace first of all (being the greatest possible reform), is the most important and urgent of all duties. I think that this idea will be new to all readers.
Very faithfully Yours - signed: U. v. Beckerath.
___________________________________________________________________________________________
8. 12. 1951.
Dear Mr. Meulen,
some private troubles, bad health, winter and what further belongs to a proletarian life prevented me to write to you, though I hod much cause to write. I hope to retrieve it. (J.Z.: I don't know what he meant here: To recover? To catch up? - J.Z., 20.4.03.) But the month December will be very bad for me. Mason work in my chamber. Moreover, the man, whose furniture I used for 8 years, now demands it and, of course, he must get it. Transport and packing will require much time.
Today I must restrict myself to confirm the receipt of many valuable printed matters and to thank you very much.
(And then he proceeded to write a letter of 6 1/2 pages! - J.Z.)
Yesterday I received the Individualist of December.
A week ago I received:
1.) "City Press", 16. & 23. 11. (From the article "Put the gold back in the Bank", by S. W. Alexander, it seems that A. really demands the restoring of the "right" of note-holders to get them redeemed as in 1913. And exactly that "right" has been the ultimate reason of all our present troubles - - in England, in Germany, in the whole world.)
2.) "National News-Letter" of 22.11.51. Ingenious, as ever, but without any program.
3.) "Truth" of 23. 11. 51. You marked your article "The gold standard", page 553. It seems a great trouble that there seems to be no conformity concerning the meaning of the expression "gold standard". You use it in a different meaning from that of the "Encyclopaedia Britannica" and Clifford Johnston uses it in a meaning which he thinks proper. I wrote to you, frequently, on this matter. It seems: you still insist, that the pricing of commodities in the shops in units of gold (grains, grams etc.) is no essential detail of the gold standard. I know, that Alexander here differs from you and Johnston - - I think - - does, too.
I see here no possibility that one author understands the other.
You say, in your article, that England was the only country in the world that ever adopted a gold standard. You know that encyclopaedias and text books do here differ wholly and, on the contrary, point out that nearly all countries of the world, before 1914, had adopted the gold standard. What concerns Germany, not a single German, French etc. author was ever in doubt that Germany had adopted a gold standard, and English authors before 1914 took it as a self-evident. The fact, that in London it was easy to change a sovereign for 20.43 gold-marks, and vice versa, would have convinced every sceptic.
Another facts, convincing in 1913, was: in every German shop gold coins had to be accepted. The latter fact was, at that time, considered as the most essential detail of the German gold standard. But in France, Italy, Russia, etc. it was the same.
2.
You are opposed to the old system, which legally restricted the quantity of currency to a multiple of the gold existing in the country. (Setting aside, here, the possibility to issue notes, not convertible into gold but only accepted like gold in shops.
You wrote me, some time ago, that such a system would not be illegal in England, though nobody uses it.)
You are very right to oppose such a pernicious system, as the old one. But when you insist, that this restriction is the only essential detail of a gold standard and that, e.g., the pricing of goods in the shops in gold units is no essential detail of a gold standard, many readers will not understand you.
-----------------------
4.) "The Malthusian", October 1951. The Malthusian's tactics is quite right: Always repeat what one has said. Never enter into arguments, - that creates a good probability of final success. But the next generation (if there is one) will be convinced that this whole propaganda was paid-for by the Russians. We, who know the Malthusians personally, know that this is not so.
5.)"Freethought News", November 1951. I wished Free Thinkers would less restrain their activity to ecclesiastical matters. Kant gave a general theory of conquering prejudices in thinking, quite unknown in England. The word "Freethought" seems no longer suitable in our times. Freethought became nearly a self-evident. But critical thought, that would be something! Kant called his system: "Kritische Philosophie".
6.) "Midland Bank Review", November 1951. In the article "Gold in the Post-
War World", the author says, that the USA will continue to buy and sell monetary gold in any amount from or to other countries at $ 35 an ounce. Will they sell their gold for that price????? I doubt it.
In the article "Symptoms and Sources of Inflation", the author - - as usual - - takes "inflation" as a synonym of "dearness". He says not a word on the monetary side of inflation and tries to prove, from government's finance, that this finance is the real cause of inflation (while it is certainly only the motive to inflate).
7.) "Time and Tide", 24. 11. 51. You marked your article "The Gold Standard". Your standpoint - - of course - - is the same as in your "Truth"- article.
I know that you are an adversary of pricing goods in gold weight units (grains, grams, sovereigns). If that is still your standpoint, then why do you not explain it and give reasons for it?????? You would be the first author (in England), at our time, who enters into that detail. You would find the greatest attention.
On the other hand: Whether you decline pricing in gold or may favour it - - invent a new word for a system, where prices are fixed in gold, but the currency is not redeemable into gold. (J.Z.: Not at any time and by the issuer but, merely, quite freely, on a free gold market, at the market value of a currency. In that case, sound currencies would be kept at par with their nominal gold weight value or close to it and other currencies would be widely or altogether refused or greatly discounted and thereby very much limited in their circulation. - J.Z., 20.4.03.)
Such a word is - - I think - - missing in the English language. The Germans possess such a word, since their great inflation, the term: Gold-Rechen-Waehrung". (Gold-accounting currency. - J.Z.)
8.) "L'Unique" - - 1. 10. - 10. 11. 51. Calls itself an anarchist paper and never speaks of the tyrannical role of currency in past times and in our time. Currency is the greatest tyrant, so as it was and still is. Breaking this tyranny should be the first step of a revolution. But the intelligent men around E. Armand do not see that.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Three weeks ago I got another mailing:
1.) "City Press", 21. 9., 5. X., 12. X., 26. X. The article of J. E. Eggleston in the issue of 21. 9. "Does this Man Really Speak for Britain?" is very good. But: Why does none of this circle, Eggleston, Alexander, J. H. Clifford Johnston, Winder, etc. simply state the text of the laws to be repealed? Most people think,
3.
that e.g. the "dollar-gap" is an economic consequence of an insufficient degree of austerity. They do not know that it is merely legislatively caused, and that by repealing these laws it would - - of course - - disappear. That people are modern economists!!!!!!!!!!
---------------------------
In the same issue is published a call of the "Cheap Food League": "Hands off the people's food!" Alexander and the others subscribed to it. Do the subscribers really think that one man will be won by that call??? Do they not know that the same slogan served the "Planning"-party and with great success?? I would have understood a call with the caption: "Hands off the people's money!" That would be new and would at least have aroused attention.
Further: English food is not dear. Convert the English food prices into gold units and you will find that in the average modern food prices are not higher than 1913. Before the League attacks these prices it should demonstrate that Adam Smith was mistaken when he contended, that if it costs 10 (or so) days to produce an ounce of gold and it costs also 10 days of labour to produce a certain quantity of the commodity X., then at last the commodity X will be sold for so much money as an ounce of gold costs. (Maybe Adam Smith spoke of precious metals in general - - at the moment I cannot verify the passage.) Admitted that Adam Smith's economic law never holds good exactly; but it holds always good with sufficient approximation.
------------------------------
In the issue of 5. X. 51, "City Press" states that second-hand houses in England now cost "over" three times what they cost "pre-war" (I think, he meant 1914). If the gentlemen would count in gold, they would simply find that Adam Smith's law is there also nearly confirmed. It seems that second-hand houses are even cheap, if their price is counted in gold. (Rent legislation - - of course.)
(J.Z.: Those not subject to rent control are often priced relatively high because they are constituting an inflation-proof investment while such investments are made legally scarce in other forms, e.g. by outlawing gold clauses. Growing populations and foreign refuge capital do, naturally, also drive up house prices. - J.Z., 21. 4.03.)
-----------------------------
In the same issue John Woollam publishes an article "Let Japanese goods flow in". He says not one word on the manner in which these goods should be paid. He should have pointed out that if Japanese commodities are paid by means of payment of British origin, then every Japanese bicycle must automatically produce the export needed to pay for the bicycle. How? The means of payment return to England with greater certainty than a pigeon returns to its coop. By their return they pay for the wanted export.
"Pay British and buy where you buy cheapest!" - that would be a good slogan for a new league.
---------------------------
In the issue of 12. 10. 51 is reported that in Russia many people became very rich. That is also my impression. The Russian officers are excellent merchants, 100 times better (*) than - - say - - Jews are. Jews excel in small business, but Russians swim in world-wide business as sturgeons in the Caspian. (I heard details in Potsdam, where I worked for about 2 years.)
(*) B. was prone to use such exaggerations to make a point. Call it poetic licence, if you like. - J.Z., 21. 4. 03.)
In his article "Britain's great problem" (in general Alexander writes very good, but these captions, saying nothing, are bad German style.), Alexander again demands a pound freely convertible. As in other articles, again he does not say: convertible at the market or convertible at the note issuer's counter, or both? Why not tell it in clear words???? (Or convertible into gold-weight priced goods and services in the shops or into the payment of debts measured by gold weight units. - J.Z., 21.4.03.)
-------------------------
In the same issue J. F. Eggleston publishes an article "Mr. Gaitskell shoots at the Grasshopper", where (whoever reads the caption is surprised) he speaks of old Gresham's Law and demands (very justly) to transcribe it into modern expressions. What he says is not false but certainly not what should be said.
Money, fit to be pushed, with advantage to debtors upon creditors will drive out other money, fit to be preserved as an investment.
4.
Here is the simple reason why old coins, diminished in weight by wear and tear, drive out new coins coming freshly from the mint. Here, too, is the reason why fiat notes, not at par at the free gold market (the word used in the meaning of 1913) with sovereigns, drive out sovereigns.
---------------------------
As an answer to Mr. S. W. Alexander's article: "How to save the empire", in the issue of 26. X. 51, I would like to ask him: Do you think that under your system England could accept, with advantage 10 million refugees, without any immigration restrictions - - refugees able and willing to work??? If you think that such an increase in labour power (and in consumer demand - J.Z.) would not be an advantage, then your system is not perfect and you should try to find out its remaining defects.
Perhaps Mr. Alexander would ask back: And would you think it to be an advantage for West-Germany if, next year, 10 millions refugees came there from England, Russia etc.? I would reply: A very great advantage, if West-Germany would establish Free Trade in goods and money, free issue of notes, re-establish the old right to refuse suspect notes (without being obliged to state one's reasons), abolished by a law of 1909 (not earlier) and a reform of the debt-legislation, by which the debtor gets the right to pay him debts by that means of payment which in German could be called "Verrechnungs-wechsel" (clearing cheque or clearing bill - J.Z.), that is: which need not be made good with the usual money but can be made good with commodities and services in common business.
These ideas are now common In the group of the "Sozialpolitische Arbeitegemeinschaft" (Berlin-Friedenau, Fehlerstr. 10) called "Exchange Service". But the Arbeitsgemeinschaft being a club of unemployed, there seems to be no opportunity to print something of these ideas. (50 years ago it would have been possible.)
--------------------------------
A Germany introducing the above-said reforms would soon renounce further American help, would repay all assistance since 1945 and, in a few years, play the role that America now plays in economics.
--------------------------------
From an article of J. F. Eggleston in the said issue I learn that the relevant clauses, on using dollars as a means of payment, etc., are to be found in the Exchange Control Act of 1947. Is there not a single man in Old England, who will copy these legal restrictions, publish them and frame a bill by which all these prescriptions are repealed????
Do you think that more then 10 men in the new Parliament know the Exchange Control Act?????
--------------------------------
Eggleston expresses very good ideas on the British policy in Persia, etc. He should also read Montesquieu's "Sur la Grandeur des Romains" and there he would find that the Romans always had in petto (in reserve, on hand, ready for use? - J.Z., 21.4.03.) pretenders, which, at the right moment, were presented to the people, with
which the Romana were at war. (J.Z.: They were more at war with their governments than with the people! - J.Z., 21.4.03).
England, in the old days, followed a similar policy. Under Gladstone the Shah in Teheran would already have been overthrown by the "rightful" ruler of Persia (probably some chieftain from its South), and that ruler would have concluded a new agreement with Britain. In Egypt a similar policy would have been possible. Its dynasty is hated in the whole country. A prince from the old Osman dynasty would have been a successful competitor. A social and economic program would have been necessary. (Here lies the rub - - neither Churchill nor Eden nor anyone in the whole party possesses such a program.)
(J.Z.: If, in the panarchistic way, not only one government-in-exile is offered as an alternative, which would also have its dissenters, but, instead, full exterritorial autonomy would be offered to all voluntary communities in the country, whose government one fights, then the number of enthusiastic allies there would be multiplied. All the "captive people" and suppressed minorities would be attracted to such a program and even the supporters or the presently ruling regime would not fight desperately, since they could continue to exist as a volunteer community under their own preferred government and would not longer have to suppress or fight their opponents. They would simply have to leave them alone and would be left alone by them. - J.Z., 21.4.03.)
------------------------------
5.
2.) "The Freeman", 27. 8. & 24. 9. 1951. A good paper, it seems. I will study it.
3.) "The Word", October 1951. From Guy A. Aldred's article "The election" I learn that he will be once more a candidate. I am very much astonished.
What Aldred himself writes displeases me and I think it displeases you, too, and for the same reasons. Obviously, A. is a friend of the Soviets.
There is a long article in the "Word" with the caption "Hindu Sabha Tribute", obviously written by Aldred, where is recommended to "hinduise British politics". From the article I could not derive what is meant and what the fellow wants.
That Aldred visited the Russian embassy and was very kindly received there, displeases me very much.
(J.Z.: How kindly would he have been received there - if he had demanded or petitioned for the release of all political prisoners, or at least of those, who were of his communist-anarchist persuasion and were still alive by then? - J.Z., 21.4.03.)
The "Word" publishes an interesting letter of an 86 years old carpenter on the monetary side of ''socialism". His views are right and clear, though not (he is excused) complete. He had asked several hundreds of voters: how many kinds of paper money are current in this country and nobody could answer. That the man put such a question much impressed me. His letter was - - your article set aside - - the best I ever read in the "Word".
4.) 'The Malthusian", July 1951. In the article: "How fast could a population increase?" it is said that it might double within 17 years. That is quite right and consoling The optimal number of population on earth being about 20 000 millions, men could attain this optimum in 100 years or so.
In the article "Human and effective demand" the editor admits, that the food question is, essentially, a monetary question. Alas, that does not prevent him from remaining a Malthusian. In the same article he admits that much food was burnt during the years, e.g. in the locomotives of South America and that fish were thrown out after large catches. He says that this should not be used as an argument against Malthusianism. I do believe that he would like that, but the facts will be used as arguments and will have their effects as long as there live people capable of appreciating facts.
5.) "The Scots Independent", August 1951. Your article: Scotland's unique contribution to banking" is excellent. I think that very few economists (if any) were familiar with the historical facts you point out. Again, you use the world "gold standard" as you use it in your other writings. If you were to replace the word by "gold redemption standard" or a similar term and used the word "gold standard" in the sense in which the Encyclopaedia Britannica uses it, you would be much better understood and would get general applause.
6.) "National News-Letter", issues of 12. 7., 26. 7., 6. 9., 13. 9., 20. 9., 4. 10., 18. 10. 1951.
In the issue of 4. 10. Stephen King-Hall enumerates the territories acquired by Russia since 1939. He finds 22.7 million inhabitants. I wonder that he did not add East-Germany with nearly 20 millions. Formally the country is independent, but it is occupied by the Russians and (practically) governed by them. Further, it is more severely taxed in favours of the Soviets than Russia herself.
In the issue of 6. 9. 51, St. K.-H. repeats the old fable that there was a "tremendous surplus of labour among
the German refugees". He should know, that there is a crazy monetary system, which prevents the refugees to transform their want into demand and that would easily be possible by the reform-system you know.
In the issue of 4.10. you marked the article on paper supply for America and for Europe. St. K.-H. says (e.g.) that if the American papers would reduce their Sunday editions from 112 pages to 72 pages, the British Press could increase its size from 6 to 12
6.
pages daily. Well - - but by simply repealing some paragraphs in her laws Britain could get paper enough to print her papers in 200 pages, if necessary and need not apply to American compassion.
7.) "Individualism", August, October and November 1951.
August: Reports the case of Sir Ernest Benn, who refused to fill out the Census form. (Which I would have filled out, - - why not?) Instead of proving his individualism in this way, Sir Ernest should have framed a program of Individualism.
Until now not a single man in England wrote a program of needed steps, except you, who in clear words demands the repeal of the act of 1844. (But that is not sufficient!!)
In the issue of November you marked the passage on page 20: "Cost of Free insurance". I miss a proposition of what should be done.
Very much displeasing I found the article on page 17: "The Cost of Living". There many textile prices are mentioned. But the price, converted in gold is not evaluated. The author might try to prove that such a conversion would be crazy. That would be his good right. But an economist is not permitted to reckon simply in paper pounds and demand that the reader take them as gold pounds.
B.) "The Libertarian" Vol. 1, No. 2., July-August-September 51. An Indian paper. It pleases me much. Very good is the article "Agriculture", on page 13. Here nothing is said about "birth control" and such things. The reform measures are well-weighed. I regret not to find the most important: credit reform and monetary reform. But the paper is young, and the issue is a beginning.
You marked the article on Confucius, on page 14. It is good, but - - like so many Chinese ones - - in general terms. To speak in general terms is - - as my dead friend Follin said, the greatest sin of a reformer. ("Paroles d'un voyant".)
The article: "Can there Be a Welfare State?" is of great honour for the author and for the "Libertarian".
"As long as the State ... has control over money power, our freedom is conditional".
Why doesn't Sir Ernest Benn write such a splendid sentence????
(J.Z.: In spite of the omission of many freedom ideas in Benn's freedom writings, I found them eminently worth reading. One should not expect too much from a single author, especially from one who was busy most of the time working himself up from rags to riches. - J.Z., 21.4.03.)
Obviously, the author found, by his own reflections, the very reform system, which I tried to spread for so many years. I am quite delighted! At the next occasion I will write to him. This India!! If they continue this way again, they will give the world a new religion, this time founded on economics. (Who was this author? What else did he write on this subject? Monetary freedom advocates of the world unite - and subscribe to full tolerance for all voluntaristic monetary experiments! - J.Z., 21.4.03.)
I do hope to write more in one of my next letters on this Indian periodical. I thank you very much that you sent me this paper.
9.) "The Interpreter", 1.7.51. The article "A new system of exchange", page 4, is really interesting. The principles are not quite clear. My impression is that Proudhon's principles are here repeated. I will write to Mr. Workman. (The Christian basis is perhaps necessary in pious Kentucky, where still today books defending the evolution theory are prohibited in schools and Universities. I will see and report to you.)
(J.Z.: I never saw writings by that author or the correspondence B. had with him. - J.Z., 21.4.03.)
10.) "Tariffs on-parade", by Deryck Abel.
11.) "These youngsters have fire in their bellies", by Harry Willcock. (Youngsters with thoughts and knowledge in their brains would be of at least equal value.)
12.) "Direct Action", June 1948.
13.) "Inflation" by F. A. Harper.
14.) Pages 739/740 of the "Economist" with articles marked by you.
7.
15.) Article "Cooperation with Commonwealth", in "Times" of 22. 9.51 and your letter to the Times of 22. 9. 51, and to "City Press" of 19. 10. 51. In the letter to "City Press" you speak of the probable effect of raising the Bank rate. I got at the British Centre the book "Bank of England, a history", by Sir John Clapham, Cambridge, 1944. My impression of the book is a very good one. Valuable are the tables showing the Bank's income from the Bank-rate
for many years. I see that even when it was highest, it must have been a very trifling part of the country's national product. The trouble, obviously, was not the amount of the Bank rate, it was the Bank's monopoly.
17.) A cut from "Financial Times": "Free gold firm" by "Lombard".
------------------------
I hope to write something about 10.) - 17.). Today it is too late and i will no longer delay the letter.
------------------------
A part of the "Individualist", December issue, concerns papers you sent me nearly at the same time. I will write on your comments in one of my next letters.
-------------------------
"Vox populi, vox diaboli", page 70. - - There is much truth in it!
-------------------------
A letter of yours is still without answer. I gathered much material for you.
-------------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
31. 12. 1951 Your letter of 27. 12. 51, received today.
Dear Mr. Meulen,
9 degrees Celsius in my Chamber (48,2. Fahrenheit), enough for writing. (J.Z.: It would not be for me. Even now, at 16 C., I need multiple layers of clothing. - J.Z., 21.4.03.)
-----------------------
Let me begin with the last paragraph of your letter.
Before Kant wrote, moralists knew only two kinds of motivation for human actions: egoism and altruism.
Your leading Christian is an altruist. Kant rejects both isms. He says that there can be no duty to make others happy, because even the wisest does not know in what happiness consists of at given circumstances. We do not
know it ourselves, if our own person is concerned. Every century possesses its own ideal of happiness, and every following century shows that it was wrong. This admitted, even a constitution framed with the best intention to make the subjects happy, will, most probably, fail.
Kant said also:
A patriarchal government is always a government where the rulers have the best intentions to make their subjects happy. Kant appeals to experience and says, that such government are, regularly, the most despotic of all. The state of the subjects, under such governments, is regularly far from happiness. In summa:
The principle of achieving happiness for subjects is to be rejected as a government principle or a constitutional principle.
What Kant means he says in the "Kritik der reinen Vernunft", Elementarlehre, II. Teil, II. Abteilung, I. Buch, chapter: "Von den Ideen ueberhaupt", page 276 of the Kehrbach-Reclam edition: (Translated somewhere above! - J.Z.)
"Eine Verfassung von der groessten menschlichen Freiheit, nach Genetzen, welche machen: dass jedes (Buergers) Freiheit mit der andern ihrer zusammen bestehen kann (nicht von der groessten Glueckseligkeit, denn diese wird schon von selbst folgen), ist doch wenigstene eine notwendige Idee, die man nicht bloss im ersten Entwurt einer Staatsverfassung, sondern auch bei allen Gesetzen zum Grunde legen muss, etc."
Kant's philosophy establishes quite new principles, neither contained in antique philosophy nor in Christendom nor in other religions. Those who are pleased that he declines altruism and Christian 'love" and happiness-making as a principle, believe, that he recommended egoism, and the others, who read that he declined egoism as a philosophical or political principle, take as self-evident that he was an altruist. And yet he was able to demonstrate by examples what he meant. Spinoza and Thomas Morus were men whose behaviour he recommended to youths as examples.
To your Christian, Kant simply would have put the question: Do you know, in what your fellow creature's happiness consists? And why do you believe that others know the conditions of your happiness?
-----------------------------------------------------------------------------------------------------------------------------------------
Your remark, that Germany has now reverted to credit restriction is quite right. The relatively good state of economic affairs in Germany is due (I think), firstly to American commitments for war material.
But the partial abolition of the "Zwangswirtschaft" (Planned & directed economy: dirigism -J.Z.) by Prof. Ehrhardt - - the latter certainly influenced by Rittershausen - - also contributed much. - - I estimate about 40 % and the war material orders about 50 %.
-----------------------------------------------------------------------------------------------------------------------------------------
2.
Our discussion on Free Banking does not appear remote in the light of present events in the world. On the very contrary: For people, who not live in the darkness of ignorance of economics, it must be clear that Free Banking (really free banking!) offers the only possible way out of the present situation. But most people live in that darkness and, therefore, they cannot see the light in which Free Banking is put by experience. (Modern men are able to get impressions, they are too silly to get experience.)
But the present situation offers many details and many possibilities. You think that part most important and I another part, and, therefore, we disagree on many points.
Some time ago I wrote to you that my starting point is this:
I imagine being in the midst of a revolution - - in Russia, China, India, Germany, and I imagine further, that the revolution has won its first battle. Now the leaders of the revolution must make decisions on the economics of these countries. The passenger of the street car must pay, the house wife must pay for her cabbage etc., so that the problem of payment and of the means of payment must be solved the very day of the military victory.
There is, technically, no other (J.Z.: honest, sound, efficient, cheap and immediately practicable - J.Z., 21.4.03.) system possible than the system often submitted to your judgement. Every other system leads to a government controlled means of payment, in other words, to an Assignats system, and that system leads, inevitably, to political despotism, even if the leaders of the revolution were angels. (Very well pointed out by Thiers in his "Histoire de la Revolution Francaise.)
You answered, that it is not your intention to give advice to revolutionaries.
Of course, that is your good right. But you admitted, and, probably, still admit, that your system offers no help to revolutionaries. Pity!
(J.Z.: B.'s monetary system is helpful not for totalitarian, nationalistic, collectivist, oppressive and exploitative etc. revolutionaries but only those interested in genuine liberation in all spheres, even in the economic sphere and there even in the monetary and financial sphere, i.e. for revolutionaries with respect for all individual rights and liberties. The others do not deserve that knowledge and even if they had access to it, would not know how to appreciate and apply it. At least to their secret services, their Central Bank directors and Finance Ministers, it has been available for decades. They did not even touch it with a long pole! As far as they are concerned, it might as well be encoded by a code that for them is unbreakable. Most of their own favourite "ideas" and opinions are quite opposed to it. - J.Z., 21.4.03.)
The situation at the evening of a won battle of a revolution is, inevitably so, that trust (in the sense in which you use the word) cannot be an element for economical or monetary reconstruction. The people trust a paper money only if they can, without difficulty, use it as means of payment in the shops and if prices in the shops do not increase almost hourly, as it is usual in times of revolutions made on the basis of the outdated financial schemes (assignats or forced and exclusive currency systems).
A better system may be based on this fact:
The shops are debtors of bankers. And the shops may trust that they will have unpleasant experiences if they do not use the received paper money to pay off their debts. That kind of trust is essentially different from the trust that you mean. The two matters have only the word in common. (I do hope, that in future two different words will be used to signify the two kinds.)
The next step must be - - that's my view - - that the revolutionary government says to the people:
People, you distrust! Do so, and freely use all means by which you protected yourself in times of economic disturbances, fix your prices in gold, in silver or in any other value you yourself think suitable. Buy gold, silver and other commodities. And if you possess gold ingots, you are permitted to coin them. If you distrust the State Mint, then go to private medal makers. But be honest. Gold ingots, whether coined or not, should always bear a stamp which indicates the weight and the fineness. Now- - in this time of general distrust - - more is needed: The stamped indication of the diameter and the thickness, also of the address of the maker and the date of coining.
And you few men, who know a banker whom you trust and who is willing to issue notes, trust him as much as you like, use his notes as measure of value, means of payment and means of hoarding - - no law shall forbid this!
------------------------------
3.
I omit here the principles of revolutionary taxation; it would become too long.
------------------------------
The next step would be to admit Free Trade in every economic sector.
(J.Z.: Under panarchism it would also be permitted in every political and social sector for all of their kinds of wanted services, disservices or freely chosen delusions. - J.Z., 21.4.03.)
All officials now used for self-blockade (J.Z.: and other counter-productive obstructionism, under all kinds of false pretences and excuses! - J.Z., 21.4.03.) are used for other activities.
Another step to be taken would be (must be): distinguish between a means of payment, which a creditor cannot refuse and a means of payment, which the creditor can demand from his debtor.
That distinction is out of your sphere. For me it is most essential. I wrote much to you about this matter.
Concerning your remark, that gold should not be a legal tender (a means of payment that debtors can force upon their creditors), Zander used to say, he would oppose to such a regulation, if he knew of one case from history in which a man really and sincerely felt himself prejudiced by receiving gold coins.
(J.Z.: If that is the case, then gold need not be given legal tender power. It is already popular and acceptable enough without this extra "quality". To give it legal tender would be superfluous. Judges would also recognise it then as a customary means of payment, for those able and willing to pay in this way. - J.Z., 21.4.03.)
That a creditor should not be entitled to demand gold, I have often emphasised. If he and his debtors, in ignorance, concluded an agreement, that the creditor should be entitled to demand gold, such an agreement must be treated by courts as a speculation in "futures", where one party promises to furnish goods which that party can only get by good luck. I refer to the many letters, in which I wrote to you about the matter.
(J.Z.: Even if there is a quite free gold market, a sudden and great demand for gold, exerted by all or many of the exchange media, which stood so far at par with their nominal gold weight value, could, at least theoretically, lead to a considerable discount for masses of these exchange media, simply because their total volume, compared with the total volume of gold, available at any time on the world-wide market for gold metal, can be rather large and the total gold stock cannot be greatly and suddenly increased. However, the prolonged existence of a free gold market and of a just, free and peaceful society, with many exchange media and clearing avenues reckoning in gold weight values, will make a "run" on the world market for gold a rather unlikely event. - J.Z., 21. 4. 03.)
-------------------------
You see that distrust rather than trust (the word used in the sense in which you use it) is the basis of my system. I think, that I do stand here on the basis of facts to be observed in every revolution. That I disagree, widely, from the classics, I do admit. But the classics did not write for revolutions.
-------------------------
I start from conditions given in every revolution. Opinions of the people, of average businessmen, etc. form part of these conditions. Experience of many hundred of years teaches, that in times of distrust people never use a paper money as a measure of value - - if they are not compelled to do so. As Paul Einzig in a very valuable book: "Primitive money" (I wrote to you about it) (J.Z.: That may have been in letters prior to those accessible to me and now, probably, lost. - J.Z., 21.4.03.) demonstrated: All peoples of the world use that good as a measure of value of which the relatively greatest quantities are available and which can be sold at a market. Example in Italy, 1945: Oil was much used as a measure of value and the value of goods and values in agreements (rents, prices, etc.) were expressed in weights of oil.
I am no fanatic for gold, but to prohibit possessors of gold to use it, with the consent of the seller, as means of payment, that would be tyrannical, I think. However, gold should have competition from oil, kilowatt hours of electricity works, transport miles of railways and some other units not yet proposed, that would be desirable. In India silver would be a mighty competitor, as it was for centuries.
You ask in your letter, page 1: "I cannot think, why you should legally prevent creditors from stipulating payment in gold, whilst at the same time empowering debtors to clear their debts by the offer of gold, thus legally compelling creditors to accept gold."
4.
If a creditor stipulates (that is, with the consent of his debtor) payment in gold coins, that is a kind of gambling. The debtor cannot possibly know whether he can procure the gold at the stipulated moment. If experience should prove that he cannot provide the gold, then courts must treat the agreement as a gambling for which a legislation exists and a voluminous jurisdiction. In the legislation of a revolution, the economic existence of debtors should not be jeopardised by the chances of the bullion market and, therefore, a debtor, who (it will have been, in all cases, by ignorance) promises gold must be judged as a gambler and his creditor too.
It a debtor possesses enough gold then the payment with gold is no risk for him. As far as the creditor is concerned: Zander used to say - - show me the man who felt himself really harmed by the acceptance of gold coins, and I change my opinion. But I will concede to you the legal possibility to exclude, by a formal agreement the payment in gold. I do admit, that today some people, for religious and similar reasons, refuse gold though they agree, that its acceptance would be to their advantage.
The latter kind of payment is always possible, for the gold is already at hand. The former kind of payment may be impossible, as so many crises taught. (Economist held the gold responsible or the gold standard. In reality the kind of agreement was responsible.)
-----------------------
You speak of the price of gold and of its fluctuations in our time - - in Germany and in other countries. The price varies because goods (including gold - J.Z.) are not priced in gold but in paper. What would be the effect if goods were priced in gold, I often wrote. (J.Z.: Then gold would not even have a price, for the "price" of an ounce of gold would be an ounce of gold. - J.Z., 22.4.03.)
You say: But people trust in paper, and will hardly price goods in gold, it they are not compelled to do so.
I say: Let experience decide. But consider that until now it has never been necessary to compel merchants to price in gold. On the contrary, they must be threatened with hard punishments to compel them to price in paper. But to repeat it: Let experience decide! (J.Z.: How many people are prepared to bet that the paper money of their government will still have the same purchasing power in 2, 10, 20 years? - J.Z., 22.4.03.)
----------------------
You insist that gold should remain the basis of credit and only for a remote future will you admit a credit system without a golden basis. (Your book page 309, line 9: "At a later stage etc.")
I demand a system where everybody is permitted to grant and to accept credit even if the last grain of gold has left the country. I start where you end. But liberty is certainly on my side.
---------------------
We often corresponded on the "balance of trade". I repeat that there is no gold necessary to make a good a deficit, if the creditor has no legal claim to get gold coins or ingots. Do you think, that in the year 1797 (Your book, page 309, line 12) many agreements were not concluded because the creditor had lost his right to claim gold?
--------------------
You say in your letter, that e.g. Germany never had free banking. In a former letter I wrote to you that after 1848 the conditions in Germany, under which a note issuing bank could be opened, were hardly less liberal than in Scotland. I wrote to you as well, that in the year 1870 there were more than 30 note-issuing banks in Germany, many more than in Scotland.
--------------------
5.
A real freedom of issue existed in old times neither in Scotland nor anywhere else. Freedom cannot be found where banks are restricted in credit-giving by their treasure in precious metal.
(It seems that silver. sometimes, played a larger role in Scotland than did gold: Your book, page 130, announcement of the British Linen Company.
-------------------------------------------------------------------------------------------------------------------------------------------
In your letter of 9. 11. 51, page 2, you say: "I think you exaggerate the need of everyday commerce for gold." I am so far from exaggerating such a need, that I contend: It is really zero. If the means of payment would be "Verrechnungswechsel" (clearing-bills- J.Z.), then a demand for gold could not arise from external trade.
---------------------------------
It is strange: You decline gold as a measure of value, but demand it as a basis of credit (in the modified forms you explained).
I decline gold as a basis of credit and demand that credit should be possible even if the last grain of gold has left the country. But I think that gold is the best measure of value found until now, provided all goods are priced in gold. Whether gold is the best measure should be tried every day by applying other measures as much as possible.
-----------------------------------
In your letter of 9. 11. 51, you say, page 2, line 11: "And if his trust in his bank has diminished, he would hardly be likely to apply to that bank for another loan, lest he find himself unable to buy with the notes." Agreed - - but then less his trust in the bank is important than the trust of others, especially of sellers of goods.
-----------------------------------
Your letter of 9. 11. 51, page 2, price of gold.
If all goods (or a great quantity of them) are priced in gold, and the notes of the banker, to whom the shop owes notes, run, too, in gold (J.Z.: do also use gold as their value standard.), then the price quoted at the bullion market is of no importance for the shop and for the note bearers. If a note bearer gets distrust (suspicious - J.Z.), he goes to one of the shops indebted to the note issuer, buys what he thinks fit, and he is rid of the note together with his distrust. The shop sends the note to the note issuer and repays a part of his debt at par and thus without loss.
It's another thing when the notes are a mere paper money, not running on gold units. Then those effects take place which you describe. The effects are not to be overestimated. In West-Berlin the East-mark in used in shops as means of payment for an amount of about 50 000 000 to 60 000 000 a month. Commodities in the West, of course, are priced in West-marks. But the shop girls calculate the daily changing East-mark prices with great accuracy and speed.
-----------------------------
Your letter of 9. 11. 51. I agree with what you write on the Bank of England. It would be best if it were just one bank among other banks, without any privileges, and the very best would be if its charter would be repealed.
-----------------------------
David Hume on Money. We agree. If the quantity of currency changes, prices
1.) do not follow very quickly,
2.) when they do follow, it is always to the disadvantage of somebody.
Hume did not yet possess the notions of clearing, of free banking and of "Verrechnungswechsel" (clearing-bills -J.Z.).
-----------------------------
6.
Determinism. (Your letter of 9. 11. 51., page 3.): "differences of effects". You are right, if these differences are "uncaused", determinism is a false philosophy. Can you imagine a difference or anything else in this world not caused???
--------------------------
Your letter of 13. 12. 51. Japanese bicycles. You say: "If we are tending to buy more than we sell, we shall have to stop buying, no matter what currency is used." - Certainly! But that is here not the problem. If the Japanese sell cheap bicycles in London and accept British pounds, the problem for Britons is solved. It is the affair of the Japanese to make the best use of the British notes. If they find, that there is nothing profitable to buy in Britain, the Japanese will not sell cheap bicycles in London a second time - - that's all. The Japanese loss (in this case - J.Z.) is not interesting from a British standpoint. (Openly confessed: For me, an Internationalist - it is not so; I regret the Japanese loss - - a fact for which they will care no more than the British will do for their loss.)
(J.Z.: Another option would be that the Japanese will not sell their bicycles quite as cheaply in Britain or would accept British means of payment only at a discount. Either the increased price for their bicycles or the discount of the British means of exchange, i.e., an exchange rate for British pounds lower than before, could make the bicycle trade favourable for both sides. I am only surprised, once again, that M. still needed lessons on such basics. - J.Z., 22.4.03.)
---------------------------
The word "Gold Standard". Perhaps you will have an opportunity to read the article "gold standard" in the Encyclopaedia Britannica, latest edition. The economist, who wrote the article, enumerates your gold standard as one of the possible kinds of a gold standard, but not as the gold standard. I found also other authors who are of the same opinion. I will try to get the passages and then I will inform you.
----------------------------
You write (letter of 13.12.): "My point is that it does not matter whether we pay in pounds which are convertible into Yen in Tokyo, or whether we buy yen with pounds in London."
If the Japanese bicycle merchant has accepted British notes for his cheap bicycles, then it is not interesting for British people whether the notes are converted in Tokyo or elsewhere before they return to England and buy there something. Interesting is only that they do, inevitably, return and by that return finance the import of the bicycles. When the notes return to England, then there is no longer any necessity to buy Yen. For what do you want the Yen? To buy cheap bicycles??? They are already bought and paid, and paid with British means of payment (pounds or others).
---------------------------
Concerned the possibility to "obtain freely gold in Germany", we were at cross purposes. I reread what you wrote in your book on page 180. There Loubet criticises the frequent changes of the rate of discount in London and the relatively rare changes in Berlin. What may have been the best method is today, after more than 50 years, difficult to decide. It may be that the British method was best. Certainly, the directors of the Bank of England were no blockheads. It may also have been the case that one method was good for Berlin and the other for London. More important, for our discussion, seems the possibility to obtain gold freely in Germany, before 1914.
Here must be distinguished (I wrote about the matter)
1.) redemption of notes into gold,
2.) obtaining gold not for notes but for bills of exchange and similar securities.
I never heard or read that the redemption of notes offered a serious difficulty for the Reichsbank. (You will not believe that it is my intention to defend the Reichsbank from a German and nationalistic standpoint.) The quantity of gold used for that purpose seems never to have been large. (I possess no statistics on this.)
7.
Another matter had been the help (the assistance? - J.Z.) for German merchants who had promised to pay in gold and whose creditors were so unkind to demand gold. (Even when it was scarce and hard, expensive or impossible to obtain rapidly. - J.Z., 22.4.03.) That the Reichsbank raised difficulties here can be understood. All Central banks of the world did the same, the Bank of England not excluded. Before the Reichsbank existed, the practice of German merchants was to beg their creditors for a delay, until their trade gave them a chance for clearing or - - what is practically the same - - to pay e.g., Americans with bills of exchange of American origin. That was not a great matter. The German merchant gave a new bill of exchange, on the basis of a discount high enough to satisfy the creditor.
Once the Reichsbank was established, it acted more and more for the merchants. In other countries it was the same after the establishment of a central bank in these countries.
A very important point is neglected by most authors. Before the cable connecting Europe and America was finished, there was hardly a technical possibility to enter into negotiations if there arose difficulties with the provision of precious metal at the time of maturity. And afterwards the costs of cablegrams were so high, that for smaller amounts the possibility was not given, either. That contributed much to make the crises in old times so severe. I heard of cases, where American merchants had procured precious metals by granting an enormous price and shipped it to Europe, and, at the same time, the European merchants did the same to meet their obligations vis-à-vis American creditors and shipped such metal to America. In the midst of the Atlantic the ships met, and when later on this became known, everybody saw, that the merchants had not used the best method of payment. But merchants at that time were not organised and so every merchant said: why reflect on so "theoretical" matters and for the profit of others? 500 years before the merchant guilds of the Italian towns used a well-organised clearing in their oriental trade and seldom sent precious metal from Constantinople to Italy. After 1492 they sent, from time to time, precious metal from Italy to Oriental places to pay for luxury goods imported from there. The metal came from America. (The quantity remaining in Europe, and increasing the price level there, is generally overestimated.)
What you quote on page 178 from Jackson is a procedure generally used in the whole world. That may be seen from old books for merchants, where the technique of external trade is taught.
The Bank of England protected its gold by furnishing gold coins that were either too light or at the limit of weight, where a gold coin ceases to be legal tender.
The basis of the whole redemption system and the collateral system of granting a legal claim to creditors, to demand precious metal - - this basis was dishonest and rested on ignorance. Therefore, the practices of the central banks had to be, in many respects, dishonest and even fraudulent.
This set aside, at the free bullion market precious metal was in Germany so easily obtained, that foreigners preferred to secured it in Germany.
Form the protocols of the enquiry of 1908 (quoted in your book on page 181) I learn - - - but I will rather copy here the passage from the speech of Freiherr von Wangenheim, page 67:
"Dazu kommt die Gepflogenheit unserer heimischen Banken, jedem auslaendischen Geschaeftsfreunde gegen die kleine Provision von 1/oo jede gewuenschte Menge von deutschen Goldmuenzen zu schicken, welche Goldtransporte namentlich auf dem Ueberlandwege statistisch heute nur sehr unvollstaendig erfasst werden."
(To this must be added the custom of our internal banks to send any wanted quantity of German gold coins to their foreign business friends, for a small commission of 1/oo. Such gold transports, especially when they went on land only, can today be statistically determined only fractionally. - J.Z.)
I wrote to you about this matter in a former letter.
8.
The old stories are of great interest for me insofar as they show, that by average authors, professors politicians etc. many grievances in the economy concerning gold were attributed to economic or monetary properties of gold, while bad payment methods, bad laws, bad payment habits, ignorance of the "experts" and other such things were the real cause.
-------------------------------------------------------------------------------------------------------------------------------------------
A proposal for measures of an economic and a social revolution must also deal with long-term credit.
Your system, essentially consisting in that what bankers in the 18th century called: "raising capital by circulation", is out of the question. If I were to propose such a system, peoples would at once ask: And where is the limit of the system? From your book I cannot get information on this important point. Some time ago, I asked you, what, in your opinion, would be the upper limit of capital provided by "coining" the trust in a banker. I got no answer.
When I engage in proposals myself, I must start from the real conditions of the East. Some of these conditions
are:
1.) There are no bankers trusted by the public
2.) Note-issuing cooperatives, too, are unknown and, therefore, cannot be quickly established.
3.) Your fundamental principle, that is: Slacken the velocity of paper currency, so that for years it would not return
to the issuer, and slow it down by continually strengthening the trust into the banker, that principle is here
impossible and would be at once rejected if one would recommend it.
4.) Notes in your sense are in the East only known in the form of State notes and fiat money. But what is known (though prohibited), are tickets (vouchers, Gutscheine, Bons) accepted like money is in the shops. Factories, cooperatives and transport firms could issue such tickets after there are concluded agreements with the shops, by which the tickets are accepted in the shops.
How quickly such agreements can be concluded is demonstrated by John DeWitt Warner in his article: "The Currency Famine of 1893." It appeared in the volume for 1895 and, a second time, in 1896 of "Sound Currency", published in New York.
That in Russia as well the issue of tickets, which are accepted as money in the shops, is possible within a few hours, was proved by the "coiner-trials" in 1934 or so. The persons concerned were no "coiners" (or forgers - J.Z.) but simply created (emergency money - J.Z.) tickets, when the notes from Moscow, to pay wages with, did not arrive. (For some reason that I do not know.)
Obviously, on the kind of tickets here described, all returning in a very short period to the issuer, no long-term credit can be based. From my former letters you may know my system - - the only one practically possible in the East. People would invent it themselves a short time after the revolution. It is as simple.
(J.Z.: I wish he had here discussed as short-term loans in "ticket-money" as would be possible, desirable and necessary for the payment of wages and salaries with it. Instead, in the following, he discussed only a long-term industrial loan! - J.Z., 22.4.03.)
5.) A value basis not dependent upon the opinions of "experts" - - bankers, officials, authors, etc. - - is indispensable in the East. May it be gold, silver, grain, or whatever, must be permitted, if there arises the least distrust at a given moment and place,. (Propaganda for your system must, of course, be permitted; that belongs to a social state of freedom of expression and information.)
6.) Instalments in repaying the credit are the only thing that here comes into question. (Here I need not state the reasons for this.) How the instalments are to be organised may be seen from generalising the following example:
A Cooperative buys a machine for the price of 10 000 grams of gold, if the price were paid in cash. But the price is paid in 60 monthly instalments and the seller gets 1/2 % monthly interest on the amount not yet paid. The compound interest tables teach, that the instalments would be monthly 193.33 grams of gold. 1/2 % monthly on a gold basis seems a fair interest. (Other interest rates should not be prohibited.) Without interest the monthly rate would be
9.
166.67 grams. The examples proves, what I wrote so often, that industrial long-term credit is hardly raised in price by interest.
Financing machine buying will, probably, be the first occasion for long-term credit in the East. There is no room for such an element as "trust in the banker".
Let me add, that the financing in the foregoing example would be performed so, that the cooperative gives the machine factory 60 "Verrechnungswechsel" of 193.33 grams each, due at monthly intervals.
(Instead of 60 of that size may be chosen: 180 of 50 grams each plus 60 of 43.33 grams each, also due at monthly intervals, so that the last one is made good after 5 years.
I enter into this detail because men of the East, really interested in reforms, demand technical details and are right to do so.
-----------------------------
You see from the example that in every case the store of goods or services ready for sale at the debtor's shop, factory or office is the redemption fund of my system; it is sufficient and necessary. (Bold lettering by me. - J.Z.)
Necessary is also that the "redemption fund" (the goods or services ready for sale) are priced in the same value unit as the ticket by which they are bought or given as "redemption".
Consider that this conformity creates a great independence (though not an absolute independence) from the conditions of the market of the good which serves as a price unit.
---------------------------
I will not continue this letter, already pretty long, though many of the most interesting points in your letters are not yet answered.
In all differences you meet in our systems, please, consider that our aims are quite different:
My aim: Financing the revolution in the East and provide a good and stable monetary basis for economic life - - the relatively best, so that every alteration would be a deterioration.
Your aim is laid down in your book.
----------------------------
A happy new year to you and most to your stomach!!!
----------------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
3. I. 1952. Your letter of 13. XII. 51., & your letter of 6. VIII. 51.
Dear Mr. Meulen,
I really missed answering the passage in your letter of 6. VIII. 51, beginning with the words: "Competition with USA." Please, excuse me! Here is my answer:
I cannot see how and to what extent there is created an additional difficulty, if the price of pounds, expressed in dollars, will fluctuate according to the balance of trade (provided such a balance exists) or according to other influences. Consider the case of an American cotton dealer, who accepts pounds for cotton sold at London. (Be sure: he will accept the pounds (if the price is right, taking the exchange rate into consideration - J.Z.), if the English say: accept them or take your cotton back to Savannah!)
What can the American do with the accepted pounds? He can:
1.) buy himself goods in England for the English pounds,
2.) he can sell the pounds
a.) to a person that uses the pounds for buying in England,
b) to a person who offers goods that suits the American,
but at last the pounds must return to England, the only place in the world where their purchasing power is of a well determined magnitude.
Now suppose that the thing happens, which you fear, and the American looses much in selling the pounds. But of what interest is that to the English? English goods are ready for sale to everybody who pays pounds for them. Whether the buyer has got the pounds cheaply or by suffering a loss, has won them or inherited them, for the English seller of goods or services or claims it's all the same.
"It may be that the American says: That was the last time that I sold Savannah cotton to English dealers for English pounds."
Well - - other Americans will sell in England their cotton for pounds and will say to the former:
If you are not able to sell pounds at the exchange market without suffering a loss, you should either use the services of a trained banker or not be an exporter. You should have looked at the exchange list when you sold your cotton and should have fixed your price correspondingly. A trained banker would have sold your pounds for the price indicted at the exchange list or at a price very close to it. Also there exists a futures market. There you could offer (with the help of a banker) your pounds at a price exactly corresponding to the price, which you expected. If your offer was not accepted, then it was because the conditions of your deal were not sound. In this case you must change the conditions or renounce the deal.
You say: The American would prefer gold.
Perhaps, perhaps not. It depends upon the quotations.
What you say in the sentence beginning with the words: "If the pound notes promise etc." is quite right. But to what extent does this refute the usefulness of buying American cotton and paying for it by English pound notes or bills of exchange or other means of payment of English origin, where an Englishman is the debtor or the obliged?
As long as there exist English goods, cheaper than the same goods abroad, there is an economical possibility to give English pounds as a means of payment. But if such goods do not exist, then there is no possibility to establish an import-export business, whether gold be promised or not. If the gold was honestly promised, then the gold, in the case described, is the good, not dearer in England than abroad. If it is not honestly promised (say, promised, while the merchants concerned did not possess gold and were not sure to get it at due time), then the effect must be that foreign merchants will no longer do business with the promisers.
2.
If all goods in England are dearer than the same goods abroad, then no trade between England and foreign nations is possible. From economists like Adam Smith, Goschen, etc. you know, that such a case is practically impossible, though theoretically it may occur.
You always insisted that the real need of trade for gold - - setting aside the needs of jewellers - - is very small and that in practice trade could be performed without gold transportation. You were and are quite right. But if you are here in the right, then I am in the right, when I contend, that, in practice, it will always be possible to sell Savannah cotton in London for English pounds, that, consequently, it is not necessary to wait until English exporters have got foreign exchange to pay the cotton and that the whole modern theory of the necessity to export before importing becomes possible, is a gross error.
Even if the pound would be in a state of continual inflation (the word taken in the sense of 1913) it would be
possible to pay by means of payment of English origin. In such a case, let the English merchants give bills of exchange running on dollars, with the clause that the quotation of the pound at the Exchange in New York shall be authoritative, when the possessor of such a bill buys English goods or services and pays with the said bill.
-----------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
4. I. 1952.
Dear Mr. Meulen,
Your letter of 9. XI. 51: "Determinism." A very good refutation of your standpoint you can find in Shakespeare's "Midsummer Night's Dream". All persons involved are convinced to be perfectly free in their actions, but they are bewitched and act not less predetermined than do steam engines. What Shakespeare here demonstrates in a little exaggerated manner is true for all situations in every life. We are all bewitched.
Your letter of 9. XI. 51. "The Post office". You are right from the standpoint of a judge - - yes, it is probably unjust, but: "summum jus, summa injuria". (Summa jus? = J.Z.) Take the USA. There journals are forwarded gratis. That's unjust from your standpoint. And yet most Americans and many Non-Americans (I, too) are convinced that everybody profits more than loses by this regulation.
(J.Z.: Is there to remain a postal monopoly, i.e., no competition and consumer-sovereignty and individual secessionism and exterritorial autonomy among volunteers in this sphere? Is the pricing system really disfunctional there? Shall we accept, for these asserted or assumed advantages, all the disadvantages and inefficiencies and high costs of a monopolised system? My own and free choice would here greatly differ from that of B. Anyhow, by now the e-mail system has made me largely independent from postal services, as far as mere information exchange is concerned, that are not tied to either paper, floppies, microfiche or CD-ROMs. But I would gladly bear monopoly postage charges - if I could send and receive very large quantities of libertarian information on CD-ROMs. Even if postage would then be zero, or still higher than the present monopoly charge, that would hardly be significant for the transportation of the equivalent of up to 2,000 books on a single CD-ROM. About 10 CD-ROMs, mailed singly or together, could then supply me with a life-time's reading matter! - J.Z., 23.4.03. - Still: Where are the first 10 libertarian CD-ROMs, filled with scarce libertarian texts??? - J.Z., 27.5.03.)
Happiness. What you say is not without foundation. But the Germans living in the Eastern zone and being, at every hour, in danger of becoming tortured, do not share your opinion.
Determinism again. If you declare to be able to imagine uncaused effects or effects partly caused and partly uncaused, I'll burn my David Hume and may become a Meulenist.
---------------------
Your letter of 27. XII. 51. Scotch notes and the clearing house.
What you say is all right. But I contend (and not only I) that Scotch bankers did not, by far, all what they could have done for Scotland's economy, if only the amount of their credits had not been limited by their stocks of gold (or silver). And it was limited in this way. The option clause only protected the stock of precious metal. It did not enable the banker to grant all credits which, by "my" system, could have been granted with perfect security, the word "security" taken
a.) in the sense of commercial security and
b.) In the sense that the notes were always at par with precious metal or so few farthings under par that nobody would have minded it.
---------------------------
I beg to recommend to you as light reading (your letter of 13. XlI., last line) Montesquieu's "Sur la grandeur des
Romains", and all writings of Machiavelli. They are pleasant and full of important political truths. (And that spirit was misunderstood for centuries!)
--------------------------
I do hope that I have now answered all your letters.
--------------------------
Very faithfully Yours - signed: U. v. Beckerath.
___________________________________________________________________________________________
5. I. 1952.
Dear Mr. Meulen,
anti - Chrysists overlook (inter alia) that, if there exists only one really free bullion market in the world, and, the Place, where this market is held, is in commercial relations with other places, that are without a bullion market, that then it is easily possible to determine the value-relation of gold (silver, etc.) to the paper money of the other places that possess no bullion market. The procedure is very simple: by "cross- rating". Example: in every issue of the "Financial Times", a table of cross-ratings is published. (J.Z.: One of the many things in my life and times and reading matter, that I never noticed! - J.Z., 23.4.03.)
In the German law on stable-value mortgages of 23. 6.1923 (Gesetz Ueber wertbestaendige Hypotheken) (J.Z.: Law on value-preserved mortgages. Apparently, it was passed in the middle of Germany's worst inflation! - J.Z., 23.4.03.) gold was admitted as measure of value. In one of the by-laws for its execution, there was determined that the basis should be the price of gold at London. The price to be applied to German mortgages was easily determined by cross rating. In this way there was taken care, in a quite reasonable manner, of the possibility, that the German bullion market was too scantily supplied with gold and, therefore, a reliable quotation was not possible.
Cross ratings provided a means to establish gold prices for all commodities in Germany, though the quantity of gold at the bullion market may have been (sometimes - J.Z.) very small.
----------------------------
The generally heard objection: There may no be enough gold in a country to determine its value, especially its relation to paper money, with sufficient reliability - - this objection is unfounded. As long as cross rating is not prohibited, the gold value can be determined with sufficient exactness.
---------------------------
Irredeemable paper money always is convertible. It is convertible into commodities. (And tax receipts! - J.Z.) If the paper money runs on a single commodity, grain, silver, gold, and the goods and services of the country are priced in the same commodity, grain, silver, gold, then the stock of that single commodity at the market, together with the quantity of goods ready for sale, represents a conversion facility on a much broader basis than the old redemption obligation of note issuing banks. If the proper money gets a discount at the market of that single commodity, then the paper money is at once brought to the market of other commodities which are priced in that single commodity and so it is converted, although not redeemed.
If the commodity-owners are debtors, obliged to pay their debts in notes, the commodity-sellers do at once use the opportunity and pay off their debts with the discounted notes they had accepted. So the notes disappear from circulation and cannot act as a cause of inflation, this word taken in the sense of 1913. But if commodity owners are not debtors, then the above cheek on inflation cannot act. If there are other checks, the price level may remain unchanged. Such other checks may be a great amount of taxes not yet paid, though due and payable in notes.
------------------------
Let me remark that until now an economic and monetary theory of irredeemable paper money, in connection with a free bullion market, Free Trade, a system of "fixed" prices in the shops, eliminating such a whimsical thing as trust (the word used in the sense in which you use it) from the elements providing parity with precious metal, but including the right to
2.)
refuse paper money in usual business and including, further, the right of Free Banking, that such a system has never been seriously discussed by economists and, certainly, cannot be discussed merely on the basis of classical or modern economic theory.
--------------------------------
Let me remark, too, that in a revolutionary system of means of payment - - the word "revolutionary" taken in the sense of "anti-fascist", so that the aim of revolution is to create as much liberty as possible and not new restrictions and suppressions (withdrawal of gold coins by the government would be such a suppression) - - that in this revolutionary system, the readiness of debtors to accept paper-money at its nominal value is an absolute necessity. Upon no other class of men can such an obligation can be imposed without tyranny.
One may say (e.g., a fascist might): But tax payers are debtors of the State, and to impose upon them the obligation to accept State notes at par would, from that standpoint, not be tyrannical. But the tax payers get no loan from the government. Insofar they are not debtors. They are (legally, not morally! - J.Z.) obliged people, not indebted people. The difference is important.
(Moreover, most of them pay only a fraction of their taxes directly. Most are automatically deducted from their incomes or are already included in the prices they pay. To that extent they do not participate directly in the reflux of tax foundation paper money. - J.Z., 23. 4. 03.)
Tax payments without using a means of payment that is connected with the danger of becoming a tyrannical means, could be performed in this way:
The obliged tax payer gives the government his "Verrechnungswechsel" (clearing bill - J.Z.), which he (the tax payer) obliges himself to accept at par in his business. Then the government can convert these Verrechnungswechsel at a large bank, whose paper is accepted in great districts.
The business of such great banks would be the object of a new theory of banking. (Elements are to be found in your book.) A very modest commencement is to be found in Andrews' "The Science of Society", a book much read in circles of individualist anarchists two generations ago.
--------------------------
In order for a revolutionary system of paper money to become technically possible, it must run on commodity terms, gold, silver, grain, etc., so that the money can get a discount at the market. The possibility of a discount is the best safety-valve in case of misuse (e.g., over-emission) and refusing the paper money is the best means to get the safety-valve to work.
-------------------------
When you are opposed to clauses imposing on debtors the obligation to accept the creditor's paper money (notes) at par and at every time and in every quantity, until the debt is paid, that is - - from your standpoint - - quite consistent.
In the centre of your system is: interest rate reduction for producers, thus creating increased production and so
increased employment.
In a system, where continuous distrust (towards politicians, in the future, in other governments, in the own government and, perhaps, even in bankers) or the possibility of such a distrust, is an essential element,
1.) long-term credit is impossible without the formal exclusion of accepting the creditor's notes in any quantity, at any time and at par, except for the amount of due payments,
2. in consequence of 1, long-term credit costs interest, as long as the demand for long-term credit is greater than the
offer.
3. You think it possible and, consequently, propose to replace, in your system, all elements, which, in other systems make interest inevitable, by trust, of the note bearers in the issuer.
In a revolutionary system such a proceeding is impossible, inter alia because distrust in the other factors, which you do not mention - - politicians, future, foreign governments, etc. will arise at short intervals. This kind of distrust may the note issuer bring into a position where he must say: ultra posse nemo obligator (Beyond the possible, I am not obliged. - ? - J.Z.), though he is considered as a merchant only and in the usual sense of the word perfectly trustworthy.
(J.Z.: Why should the goods and service providers accept the money issued by third parties, when they are not commercially or legally obliged to do so? Especially when it is already depreciated and further depreciating or they suspect that it may soon be worth even less? They might simply say: I am not interested in your confidence trick, comic opera or circus performance tickets. Others may value them but I do not. Pay me with sound currency. Or they may accept them only to the extent that taxes can be coercively imposed upon them and extracted from them, at any time, and are made payable in these notes of third parties. Otherwise, they would accept only the ticket money issued by themselves, and similar issuers of "optional money", that obliges only the issuer, unless the money of third parties is given the legal tender, fiat money, forced currency and exclusive currency privilege. [Forced value and forced acceptance] ) - J.Z., 23.4.03.)
Some, time ago we had a discussion on the points here explained and you answered: A system may be good for a revolution and may yet not be the best for the case in which normal conditions are restored.
Maybe you are right. But, certainly, some people will say: Let us keep the system which worked so well even during a revolution. (When all other systems tend to fail! - J.Z., 23. 4. 03.) Times are still unquiet. Every day it may become necessary to provide for a second revolution or for a war.
On the other hand, I always emphasised always liberty of opinion and, consequently, all possibilities of propaganda (and self-concerned and tolerant actions! - J.Z., 23.4.03.) for adherents of other systems than the here sketched revolutionary system.
-----------------------------------------
Let me here - - in short - - allege still some details of your system, which exclude its application in Germany or in countries of the East.
1.) The system of an invariable unit of value cannot be established in Germany, Russia, Poland, etc. Here prices of a former period are forgotten and the papers in which they were recorded are burnt. Also the prices were different in different districts, the different quarters of Berlin not excluded. (Was it not the same in London? For Paris the difference is proven.)
2.) Redeeming notes at the market price of gold, by the note-issuing banker and sending the public simply to the bullion market (or goldsmith - - your book, page 312), where you recommend this procedure for a later period),
would, in the said countries, be considered as, economically, the same thing. But people would ask, suspiciously: Why does the banker insist on going to the market for us?
----------------------------------
(Concerning England you should - - I think - - form a bill, by which the present legal obstacles to your system are removed, if Parliament accepts it.)
----------------------------------
In the revolutionary system no protection of gold (the word taken in the sense in which you use it in your book and in which Central Banks use it ) is provided. Gold, in this system, only serves as a measure of value or as raw material for jewels, artificial teeth, etc. Gold may serve as a measure of value, whether it may be ready at hand or quoted at a distant place.
Further: When all commodities of the country, or a great part of them, are priced in gold units, then the stock of the commodities ready for sale, works as an immense gold redemption fund, provided the commodity owners must accept the notes at par. (Put in bold by me. - J.Z.)
Prof. Hirsch, in the year 1930, estimated the value of goods, ready for sale in Germany, at about 30 000 millions of gold-marks. That was more than the 10-fold of that what the Reichsbank had ready for redemption in gold at the time before 1914.
The difference in favour of the commodity redemption system was: Obviously, the Reichsbank promised - - concerning redemption - - always more than it was able to fulfil in the case of a run. But the 30 000 millions in form of a stock of commodities were at hand, were no swindle and were, at the time of the crisis, besides the tax foundation, the element which kept, pending the crisis, the notes at par with gold.
(J.Z.: To this amount must be added the total value of all services ready for sale and the value of all debts immediately or very soon due. They also exert a demand, suction or reflux pressure upon all the notes issued, thus giving them a strong pressure towards their par-value. - J.Z., 23.4.03.)
--------------------------
4.
Let me speak quite openly.
That you will not recommend your system, worked out in years of peace, under conditions very different from the present, for quite other purposes than are to be faced today, that you - - I say - - will not present this system to revolutionaries, who follow quite different aims, that I do understand.
But why will you not contribute something to a plan for a monetary system for a liberated Russia, Poland, Germany, etc.? (And one that would greatly help in the liberation of any despotically ruled country? - J.Z., 23.4.03.)
Criticise the here sketched system, and consider the aim of the system, and you will have already contributed something.
---------------------------
Benjamin R. Tucker did an immense preparatory work. But as a revolutionary system - - under the present conditions, this work cannot be used
1.) because he did not distinguish long-term loans and short term loans, or - - in other words - - exchange of
present goods for other present goods and exchange of present goods for future goods, still to be produced,
2.) because he grossly overestimated the burden of interest and confounded the necessity to pay interest in legal
tender (always scarce) and the quantity of interest to be paid.
If Ford owed only one dollar, but to be paid in gold, and he does not possess this dollar, then he is bankrupt. But one should then not say, that the interest burden for Ford was too high.
Benjamin R. Tucker is insofar excused as all economists of his time overestimated the economic weight of interest. For production purposes interest is (in most cases! - J.Z., 23. 4. 03.) a nearly negligible factor, as may be proven by - - say 100 - - randomly taken reports of great producers. (Or small producers).
-------------------------------
Let me here allege an important fact:
The quantity of gold hoarded was at all times so great, and still is so great, that the price of gold is nearly independent from current production. Current production may lower its price (its value relation to other goods) (very gradually, seeing the total quantity of the stock accumulated over thousands of years - J.Z., 24. 3. 03.), but the diminution of production in practically without influence. My opinion is that the events at the bullion market in the last years confirm this old relationship.
-------------------------------
Increased production by low interest: Suppose: interest is extremely high - - but when the interest-receivers spend the interest, then the quantity of demand is as great as it was before. It is only shifted.
It is the same as in the case of increased wages. Production is dearer but total demand remains the same, so that the same quantity of goods is sold as before. The demand has merely been shifted.
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
17. II. 1952.
Your letter of 9. II. 52, received 15. II. (six days from London to Berlin, longer than usual).
Dear Mr. Meulen,
first of all: excuse my long silence. Though my problem of heating is solved, I still suffer from winter sickness. It's the same in every winter and has been for many years. In the night, when normal people sleep, I cannot, and in the morning, when normal people rise, I begin to sleep, but not 7 or 8 hours, like normal people do, but much more, sometimes 12, and 14 hours are not seldom. Winter must be over before I become more active.
(J.Z.: I still believe that drinking much coffee in the evening and in the first part of the night contributed firstly to this sleeplessness and then to exhaustion and prolonged sleep during the day. At least in this respect he may not have been sufficiently observant and thoughtful. - J.Z., 23.4.03.)
Rittershausen sent me from Mannheim and by railway a great quantity of coal, though they suffer from coal shortage at Mannheim no less than here. That's friendship! Also, I had the good luck to be able to buy some coal, so that my chamber is as warm as yours.
----------------------------------
Rittershausen's letter of 5.II. 52. I return here enclosed.
I regret very much that I wrote on the share of American commitments in Germany's recovery. If I would have known that Rittershausen, too, wrote to you on this subject, then I would certainty have been silent, which, as the well known Arab proverb teaches, always is the best way. ("Am Baume des Schweigens haengt seine Frucht: der Friede".) (On the tree of silence hangs its fruit: peace. - J.Z.) In no case - - of course - - will I begin a discussion with Rittershausen, in an English paper about such a matter. All the more when there is much truth in what he explains. When I enter here into some details it is because I trust in you that you will not print my modest contributions.
Rittershausen is insofar in the right, as German factories certainly do not manufacture cannons, shells, aeroplanes and such things. But I read in German papers that the factories manufacture things needed to manufacture war material. That these semi-manufactured products are exported to the USA nobody will suppose. Whether they are finished in France, Belgium or in England, I do not know. But I am convinced that no official statistic will reveal the way of these semi-manufactured products if the assertion of the papers would be true that they are manufactured. Concerning this point I think: If the assertion would be true, then English papers will observe the fact not any less than German papers. If English papers do not mention the kind of production here in question, then Rittershausen is certainly in the right to saw that this production does not exists. For a long time I could not study the English papers in the British Centre: my health was too bad. Therefore, I do not know what opinion the English press uttered.
Less attention deserves the often repeated assertion of the Eastern press that the Bundesrepublik produces things only to be used for industrial, agricultural etc. purposes, because the Allied's industry is fully occupied with the production of war material, so that it cannot sufficiently supply the West with tools, certain auxiliary engines, etc. The Bundesrepublik, say the Soviets - - fills the gap and so, indirectly, but efficiently helps to produce war material/ News from the East are always suspect.
I believe myself that even very large commitments from abroad would not have been a considerable help for Germany if there would not have been allowed a more liberal impact of supply and demand by the minister Erhard. (Germany still lives under dictatorship, but Erhard is no Hitler and is a better economist than the German professors - - Rittershausen excepted - - were in the years after 1945.)
2.
Therefore, I beg you to print his correction and, if you think that there is something to be added, refer - - please - - only to English papers (if these papers were occupied with the matter) and not to my present letter. Also, I beg you to consider this letter as one for you personally and not for anyone else.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The word "Staatshaushalt" is translated by Toussaint-Langenscheidt's Dictionary by: "Finances of the State". I think it is practically the same as "budget". In the passage here in question Rittershausen means the expenses-part of this budget.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
I try to translate the passage marked by you on page 2, beginning with: "Man hebt Bankguthaben ab …" and ending with: "… des alten berechnet".
People withdraw their accounts with the banks. People sell also the few gilt-edged papers which survived war and currency reform. What concerns the latter: By the currency reform the gilt-edged (but not the quite lost public loans) were reduced in value so that a paper formerly of 100 marks now possesses a nominal value of, say, 6 marks. The interest in now calculated from the remaining 6 marks. That interest-rate is different and varies from 4 % or 5 % to zero.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
What Rittershausen says of the general tendency in Germany to use commodities as investment is quite right. This tendency is general in all countries where the currency is fiat money, but this is no novelty for you: The English papers wrote and wrote much about it.
As in the whole world, the people in Germany fear rising prices. By what causes prices may rise the people do not exactly know. The better informed know, that the greatest danger at the moment is a devaluation. Devaluations, at the present state of "development" are the best means to cheat all people whose wealth consists in claims to money, creditors in general and workers as wage-receivers. These people, ignorant as they are and mislead by the new language (dearness = inflation, etc.) do not knot why prices suddenly rise and make shopkeepers, Jews, Freemasons, Jesuit's, the Pope, the "international haute-finance", "speculators" etc. responsible. Most feared is the "international haute-finance", corresponding to the old experience that powers which do not exist are most feared. While in the pubs workers and the so-called "educated" discuss the question: "Who really makes prices rise?", all are convinced that prices will rise for some reason. Printing of forced currency-notes and devaluations are never discussed as causes of rising prices. But a few people know the connection well.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
What Rittershausen says of credit restrictions is true. But I draw the conclusion that no government possesses the right to introduce a monetary or economic system by which a single man, the note-bank-president, is endowed with the power to restrict credit. To introduce such a system violates the monetary rights of man and citizen. These rights exist, though they are till (until - J.Z.) now (not still - - thank you!!) not published.
In England and in the whole world, the whole peoples with the exception of about 10 men - - I estimate - - (Do you belong to the 10?) takes the now granted rights of the bank-president as self-evident. What a decline since 1852!!!!!!!!!!
-----------------------------
Very truly yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
18. II. 1952. Your letter of 9. II. 1952.
Dear Mr. Meulen,
some of your letters are not yet answered, a lot of most interesting printed matters is not yet confirmed - - I think I will be able to catch up with it in March.
----------------------------
You wore so kind as to print my remark on Gresham's law at page 10 of the "Individualist", 1952. Thank you very much. I cannot believe that I am the first, who discovered the completion of Gresham's law. I would not be astonished if an author like Goschen would have detected it at his time, - - a time whose economic thought was so far superior to ours. But I cannot verify my conjecture, Goschen's main work being burned in November 1943. If you discover that another said the same as I, you would oblige me much if you told me. You know that I like to refer to elder authors to strengthen my position. Here I take as a model the most successful social reformer of all times: Kong Fu Tse. He always referred to ancient law-givers and moralists as Yao, Shoon and others (who, probably, never lived. The greater was their authority and, by referring to them, Kong Fu Tse's).
- - - - - - - - - - - - - - -
There is much honour to be asked by an author of your rank for my opinion about your article "Control of Imports", in No. 1 of the "Individualist", 1952.
(J.Z.: Here B. "lays it on a bit thick", for, according to this letter exchange, M. had always been a rather slow learner regarding the details of Free Trade and the monetary aspects of it and may never have comprehended all of B.'s explanations nor was he able to refute them. - J.Z., 23. 4. 04.)
I will try to tell something reasonable, but from an old anti-etatist you will not expect any concession to etatism and may the idea in question be ever so modern and generally acknowledged. My motto is that of old Abaelard:
"Si omnes patres sic, at ego non sic!"
What you say is all right, except - - that's my opinion - - that the round-about way of buying with foreign currency is necessary and that paying for imports with means of payment of domestic origin (Verrechnungswechsel) is neither possible nor necessary.
Please investigate whether your adversaries did not also start from the same presupposition and drew exactly
from this supposition their arguments to impose State control on imports.
But you know this kind of logic - - now used in all countries - - as well as I do:
1.) buying imports with foreign currency is necessary, not only because it is prescribed by the State and even the
mere offering of domestic currency is prohibited, but because the State, in this case took the right measure.
Here - - say the moderns - - an economic necessity is given.
2.) foreign currency must be procured. In practice there is no other possibility to procure foreign currency than by
export. Loans only differ (postpone - J.Z.) that necessity.
(If No. 1 would be right, then No. 2 would be right, too. But No. 1 is not right. I demand a chance for the principle opposed to the "foreign-exchange-control-principle". I am glad that here "City Press" and its collaborators do fully share my opinion. Certainly, they found the reasons for their demand quite independently from living or dead economists. They are excellent men. I always regretted that you do not assist them in this demand and only generally approve their demand for greater economic freedom in external trade. But the last consequence of greater freedom in external trade is the permission to offer means of payment of domestic origin to foreign exporters.)
(J.Z.: Although M. must have known that the English Pound was once the major currency in international trade, everywhere gladly accepted and offered without hesitation, it had become, by the usual governmental and central bank mismanagement, one of the "soft" currencies and thus was no longer as welcome as the somewhat less mismanaged and deteriorated U.S. dollar was. But this was no reason to assume that the official British means of payment and all alternative private ones, would always have to be of an inferior and less acceptable quality and then to perpetuate this belief in corresponding legislation. - J.Z., 23. 4. 03.)
3.) The fact, that every country (government) in the world is quite ready to sacrifice what can be sacrificed, if
export is made possible by the sacrifice, is acknowledged by the planners and controllers, but represented by them as a model for the own country. Use the said tendency in foreign countries as a help to get the imports from the foreign countries without buying foreign currencies - - no - - never - - we do not discuss that - - don't like it - - and now shut up! And the subjects obey. In the year 1852 they would not have obeyed so willingly.
(J.Z.: Even then and after the long battle of the Anti-Corn-Law League and its propaganda, they did not throw out all of the remaining restrictions on Free Trade and thus, step by step, Protectionism could be re-introduced. - J.Z., 23.4.03.)
4.) No. 3 being beyond the limits of this discussion, the export-possibilities are to be found out, studied and, if found, the necessary sacrifices to realise these possibilities are to be imposed upon the people - - that's clear! (Says the controller.) - - The sacrifices are exactly the inconveniences you speak of in your article and represent them with great clarity.
-----------------------------
What the collaborators of City Press do not know is: The freedom they demand leads inevitably to the "Verrechnungswechsel" (billet d'echange de compensation - - that is: where the holder does not have the right to demand cash, but can only demand clearing or immediate use as mean of payment vis-à-vis" the man who is obliged by the billet de compensation.
It seems the English language does not possess a fit expression. That would not be astonishing insofar as it does not possess an expression, either, for the German Verrechnungsscheck (Clearing-cheque) - - used in Germany for decades - - and the French "chéque de compensation", used in France, too, for decades.
The English "crossed cheque" is a quite different thing, though it replaces in many cases the chéque de compensation.)
-----------------------------
The fault of the City Press - men is that they gladly acknowledge the privileges of the Bank of England, the note-issue monopoly, the right of the Bank of England to impose a "Bank rate" upon the country, and - - worst of all - - they want to renew the old vicissitude that the Bank of England should be obliged to redeem its notes at par in gold (coins?? they do not speak about it) and on demand. Even King Solomon, with his gold treasure and the celebrated magic ring, by which he was the master of all ghosts, would, in the long run, not have been able to meet the program of the City Press. (Please do not print this attack. If I were here to publicly express an opinion, then I would express myself more politely.)
------------------------------
In your article you speak of the probable results of a referendum. Here you are perfectly right. But why not begin with the preparations for a referendum? Why not announce the preparations???? The mere announcement would arouse the greatest attention.
A referendum needs a slogan. I propose:
You - - Englishmen - - use the whole world as your market, but pay British!!
-------------------------------
Private profit, page 4. Please investigate the reports of the German joint stock companies. 50 years ago the profit there was - - in the average - - as great as the amount of the wages. Now, in the average, the amount of profits is about 1/10th of that what the employed and the State receive, together. That indicates an economic and - - more than that - a mental bankruptcy. The time has come for the cooperative principle to take over the whole business.
--------------------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
U. v. Beckerath, 1. 5. 1952.
(1) Berlin-Friedenau,
Schmargendorfer Strasse 21, III.
American Sector.
Dear Mr. Meulen,
that was a long sickness - - an anaemia with reduction of blood pressure to about a half of normal and aggravated by an insomnia night for night (with few exceptions) for about 6 months. I was not able to write or to work seriously. For some days now I feel much better and I do hope to be restored in the course of May - - insofar as a man of 70 can be restored.
-------------------------------
If I would have been able to write to you the many things I was thinking of in the long sleepless nights, you would have received a voluminous manuscript, but it may be that you do not lose much by not getting it.
-------------------------------
I was not quite idle in these months. It is strange, that some of my acquaintances were in a similar situation as I, that is: they could not sleep in the night. We resolved to meet simply in the evening, when the normal man goes to bed and to use the nights for discussing the things interesting for as. We met twice a week.
Insomnia seems to be widespread here - - perhaps by the great quantities of chloride of lime which are added to the water of Berlin, most in the American sector. Some days ago the authorities promised to reduce the admixture.
------------------------------
Our themes of discussion were the same as those of the last year:
1.) by what organisation of the economy would it be possible to provide every fugitive from the East within a
few hours with employment and the necessary means of payment, without inflation?
2.) by what organisation of the economy would it be possible to rebuild long-term credit and, correspondingly,
get employment by construction of houses, etc.?
3.) how must the East be economically reconstructed?
4.) is it possible to use in Europe the methods of Mao Tse Tung to extinguish a war?
and the 100 questions arising by discussing the details.
-------------------------------
Our standpoint was: If there exists a science of political economy which is better than a mere compilation of the many opinions of economists, then this science must be able to solve the questions. And we are all convinced: It is possible.
------------------------------
I hope to write to you a long letter next week.
------------------------------
Very faithfully Yours - signed: U. v. Beckerath.
____________________________________________________________________________________________
U. v. Beckerath, …. 2. 5. 1952.
Dear Mr. Meulen,
perhaps you remember from a former letter of mine about Malthusianism, that I do not see a reason to except animals and plants from the modern theory that to every kind of things (insects, stars, stones, empires, with no exception) belongs
1.) a maximal number of things existing at the same time,
2.) a maximal number of things existing during the time while the kind exists as a species or race,
3.) a maximal time of duration,
4.) a maximal possible length (for human beings the maximum seems to be about three yards),
5.) a minimal possible length (Buffon measured the length of a female dwarf of 17 inches - 43.4 centimetres), etc.,
so that it would not be true that there is a tendency in plants and animals to increase ad infinitum, as Malthus supposed.
The same theory I find expressed in an old book: "Denkdummheiten, Merkworte zur geistigen Selbstzucht" (Stupidities & Thoughts on Mental Self-Discipline - J.Z.), by Dr. George Biedenkapp, 1896. (Page 51ff, and at once applied it to Malthusianism.)
When I was a young man, I lived at Frankfurt on the Main. An old anarchist, whom I knew, was well acquainted with Dr. Biedenkapp and told me (it may have been in the year 1904 or so), that the Dr. was a good connoisseur of the anarchist movement, felt much sympathy for it and often gave assistance in money and otherwise to anarchists arrested. But he was strongly opposed to bomb-throwing.
From book catalogues I know that Biedenkapp wrote many books on scientific subjects.
The modern theory starts from Einstein, but, obviously, the priority mus